Knox Henderson delves into the value proposition behind Rritual Superfoods, which has just started trading this month.
When you have a combined 100 years of experience paving a “superhighway,” it only takes a good vehicle to hit the ground running. That’s exactly what Rritual Superfoods Inc. (RSF:CSE) has done with the launch of its plant-based elixirs, with a focus on functional superfood elixir products. Founder and CEO David Kerbel, who has 35 years of his own experience in product development and distribution of consumer package goods (CPG), is so confident in his mostly U.S. based network; he sees an accelerated growth in top line sales, profits and valuation of his company.
Investors appear to agree as the company’s stock price bolted as it started trading; it zoomed from 50 to 90 cents in five days of initial trading in early March. Meanwhile Clarus Securities, from its initial coverage, has already given the company a $1.50 target based on 6x its 2022 estimated earnings:
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“We expect management’s expertise and extensive relationships within the industry to allow Rritual to achieve higher than typical store penetration rates, rapidly grow its revenues, and potentially cross-sell additional products over time, giving it a substantial competitive advantage over its peers.”
Note that a six-time multiple in this very hot functional food sector is conservative. Another peer, Laird Superfoods Inc. (LSF:NYSE) went public last year with a $450 million valuation at a roughly 25X multiple of top lines sales.
By combining holistic formulations for functional mushrooms with other natural adaptogens as enhancing catalysts within the body, Rritual’s formulations are on track to meet a $275 billion functional food market demand, growing at a 7.9% growth rate (Gran View Research) and a $34 billion marketplace for functional mushrooms and adaptogens (Mordor Intelligence).
The company already has seven products (SKUs) for its functional powders and plans to be in a whopping 2,500 stores with 10,000 points of distribution in the U.S. alone. Canada, Asia-Pacific and Europe are next in sight. The beauty of the product is that it’s just powder, very easy to ship and easy on the logistics.
“After 35 years in the CPG business, I’m here because I want to be. This is an exciting time for me. This is my third IPO and by far the most compelling,” says Kerbel.
One of the highly successful products Kerbel launched with his now VP of sales, Sarton Molnar-Fenton, was the energy drink Celsius, a competitor to Monster and Red Bull. Celsius Holdings Inc. (CELH) currently trades on the NASADQ at a US$3.4 billion market cap. Both Kerbel and Sarton have teamed up for U.S. sales on Rritual Superfoods.
“Sarton was with me for 15 years, through the launch of Celsius,” says Kerbel “We’ve done this before; we’ve road-mapped the entire national distribution over that period. So, for the calls we make to our retail partners, there is always a good chance that they’ll return them. What we did was map that same strategy 10 year later and we’re now employing it with Rritual Superfoods. We are identifying the customer that really walks the talk in their commitment to health and wellness and marrying them up with strong programs that will support the brand.”
The core of the Rritual team goes long and deep with over 100 years of combined specialty CPG experience with leading recognized brands such as Celsius Beverages, Nude Beverages, Gaia Herbs, MegaFoods, Nutiva and Danone, to name a few. For competitive reasons, Kerbel is coy about naming his big U.S. distribution partners at this point, but further announcements will be made, and “you can be sure these are the widely recognized national-scale distribution brands we all know and love.”
So what is so “super” about these foods? I’ll let their presentation speak for itself:
“Our small batch elixirs are made with mindfully selected superfood mushrooms and herbal adaptogens known to help keep your immune system optimally running, support healthy cognitive function and outlook, as well as help you manage day-to-day stress in a harmonized way. We then add superfoods and spices like cacao, ginger and cinnamon, resulting in blends that are as delicious as they are beneficial.”
That sure sounds nice, but a quick search on the internet delves deeper into the Chaga Mushroom found in their Chaga “immune booster.” According to healthline.com, the Chaga mushroom is “packed with antioxidants, its extract may improve immunity, chronic inflammation, blood sugar and cholesterol levels.” Rritual’s Chaga blend “combines the chaga mushroom with the adaptogen Eleuthero root for optimal immune system benefits.”
Rritual’s Reishi blend includes the Ashwagandha root “to help body and mind combat anxiety. Long term use can also improve quality of sleep for restless minds.” The product is rich in triterpenes, polysaccharides, fatty acids and amino acids. Lion’s Mane is a “blend of lion’s mane mushroom and rhodiola root supports cognitive function and brain health, while also improving your body’s ability to manage stress.” All of the products can be viewed on the company’s website rritual.com.
But what Kerbel is so excited about is the taste. “It tastes great, its not really a ‘mushroom’ flavor but it has a unique earthly note to it. I put the Chaga Immune Elixir in my coffee every morning, Lion’s Mane Focus in my midday smoothie and have Reishi Relax in the evening.”
With revenue growth estimates to run from $8.4 million after the first year of shipping to $25 million by 2023, a gross margin of about 40% and financials that are EBITDA positive in the second year from launch悠 like the taste of that.
Knox Henderson is a former equities securities trader, a journalist and capital markets communications consultant. He has advised for a broad range of small cap companies in the resource, life sciences and technology sectors for more than 25 years.
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