Maggie Beer Holdings Limited (MBH) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Maggie Beer Holdings Investor Briefing. I'm Kinda Grange and as the CEO of Maggie Beer Holdings, I'm absolutely thrilled to be here today to share with you an update on our strategic growth plan. First, I'm going to provide a recap of our trading results, then I'll share with you my observations of the business today, how I'm thinking about the future of the business, in terms of the vision, the aspiration, the strategic growth pillars. The enablers to that growth plan, a summary, and then I'll open the floor to a Q&A. So firstly, to kick off with a recap of our trading results for continuing operations. These are a summary of the results that we provided 2 weeks ago. As you can see, from a net sales revenue perspective, rising interest rates and inflation have impacted consumer spending. We do have a very seasonal business that is skewed towards Christmas. So you can see that our second half results are historically lower than our first half results. Whilst our second half revenue between the months of January to April is up 5.3%. What we're also seeing is that there is a shift from online to bricks and water. So for the Maggie Beer products business, we're seeing growth of 13.7% for the second half Jan to April, whereas on the HGA side of the business, we're seeing that revenue is down 12.2%. So our full year guidance on revenue, continuing operations is in the range of $70 million to$70M to $75 million. On the EBITDA side, we're seeing the higher freight, labor and energy costs. Combined with the lower revenue in the HGA business is impacting our EBITDA. The increased costs that we saw in the first half have continued in the second half with the exception of advertising costs. And then in addition to higher costs, we're also seeing a channel and product mix shift, which has also created a gap at a gross margin level. So our full year guidance for continuing operations for trading EBITDA is in the range of $3.5 million to $4.5 million. I'd now like to share with you my observations of the business. I'm 100 days in, and I've had the opportunity to meet with investors, with customers, and of course, with our people. And one of the common questions that I received is, why did you decide to join Maggie Beer Holdings? And for me, it was the immense potential that I saw in the business. Obviously, with the iconic Maggie Beer brand with really strong assets in manufacturing, a very strong e-commerce platform and a very healthy balance sheet. These are my assumptions coming into the business. And I can say that after 100 days, those assumptions have been reaffirmed. What I see is a business with really strong assets with untapped potential. The market-leading brands, not just in Maggie Beer, but also the [ Hamper Emporium ] and Gifts Australia. We have scalable and fit-for-purpose manufacturing assets. In Tanunda, in South Australia, we have an innovation hub, a test kitchen and really strong capability in our hero Maggie Beer products. And at Paris Creek Farms we have a high-quality dairy manufacturing asset. We also have a really strong e-commerce platform with global procurement capabilities a very scalable and efficient fulfillment center, an efficient dispatch and timely delivery for our customers. And all of that is underpinned by a very passionate and nimble team and a really strong balance sheet. So here, we have a business with all of the ingredients required to tap into that potential. And so what I'd like to share with you now is how I'm thinking about the business for the future. Our vision is to champion the joy of Australian food and culture and gifting. And when you think about the business that we're in, the products, the solutions and the experiences that we create for our customers, they all spark joy, and that's a really exciting space to be. The aspiration is to create a $300 million net sales revenue business with strong margins and strong return on assets. And so to -- and the reason that we think that this aspiration is achievable is that we operate in a really large addressable market across food, in cooking, entertaining desserts and dairy. In Culture, Kitchen, Home and Garden and in Gifting, we're looking at a market opportunity of over $36 billion. We only have to take a very small share to achieve our aspiration. Which to achieve that aspiration, we've had to reimagine the assets in our business. I've reimagined the Maggie Beer brand from an iconic food brand to an iconic food and lifestyle brand in Australian kitchens, homes and gardens. I've reimagined the Paris Creek Farms business from a specialist organic dairy focused on white milk through a superior quality dairy manufacturing asset with strong capability in cheese and in yogurt and in desserts. And I've reimagined the Hampers and Gifts Australia business from a market-leading Hamper and Gifts business to a market-leading e-commerce platform that is the first choice destination for gifting, entertaining and cheering occasions. But not only have I reimagined the 3 individual core assets of the business, but I've also reimagined how they can work together as a unified force. And I'd now like to share with you the 3 key strategic pillars. Firstly, we will optimize and unify our assets. We will be retaining the Paris Creek Farms asset, as you may have seen in the announcement earlier today. And we'll be investing in capacity and capability in value-added dairy. We will utilize that asset across Paris Creek Farms brand, Maggie Beer brand and also for third-party manufacturing. We will also integrate our 3 discrete business units, we're looking for synergies here and cost efficiencies, and we will streamline operations across our 3 sites. We will implement really robust supply chain processes. We will also be relooking at our core range management to ensure that we have really streamlined and efficient product ranges. And I'll talk in a little bit more detail about Paris Creek Farms. Secondly, we will expand the Maggie Beer brand. Firstly, there are opportunities within our core range and within our core channels, of supermarkets and online to further grow penetration. Then we will also expand the Maggie Beer brand across food and lifestyle, leveraging the e-commerce capability that we have in place. And while the Maggie Beer brand has an immense awareness, we need to create a higher level of awareness in the products and solutions that we have. And we'll do that by focusing on the brand at a master brand level and building the brand through an omnichannel presence in marketing. And then the third pillar is to scale that e-commerce platform to build that business beyond being so focused on the Christmas period. So firstly, we will strengthen the foundations in operations. We'll continue to focus on customer service. We see opportunities to further improve conversion on our existing 3 websites by enhancing the customer experience, and we will do that by continuing to expand our digital ecosystem. And of course, we will continue to keep the offer fresh. Ensuring that our products are aligned to consumer trends. And I'm also really excited about building out new verticals and new growth horizons. I'll now spend a little bit of time talking about each of these 3 pillars in a bit more detail. Firstly, optimizing and unifying our assets. I'll start by saying that the dairy asset is strategically important to our growth. As I came into the business and looked at the categories that we operate in, what really stood out was how attractive the dairy category is. As you can see in the table, the consumer demand for premium dairy continues to grow. So it is an attractive category for us to be in. In addition, when I look at the Maggie Beer brand, we have proven our success in dairy. The specialty cheese segment for the Maggie Beer brand in supermarket is actually our largest category. We are consistently attracting a loyal and premium customer base. And in addition, from an online perspective, our cheese hampers have shown really big success in FY '23. And so far, year-to-date, we've almost sold $3 million worth of cheese hampers. So the strategic rationale is there. The key priorities in keeping this asset is, firstly, to optimize the site for operational efficiency. We have to reduce costs, and we will do that through a zero waste mindset. We see opportunities to optimize labor and freight, and we will also look at the tail of our SKUs, particularly in yogurt. And we all sweat the asset. We're very focused on growing volume in cheese, in yogurt, in butter, in milk. We'll also enhance our innovation, both in existing capability and also upgraded capability. So in white mould cheese, we will be investing to upgrade the capacity and capability to in-house the cheese that is currently outsourced for the Maggie Beer brand, and that will enable us to further grow penetration in supermarkets and online. In yogurt, there are opportunities for us to further expand and utilize the current capability in yogurt. And into the future, we will develop other high-value dairy innovation under the Maggie Beer brand while continuing to support the Paris Creek Farms organic offer. So I'm really excited to be able to share with you more detail around the growth plans we have for these dairy asset. Now I'll go on to our second pillar of re-imagining growth. The way I'm thinking about expanding the Maggie Beer brand is under 2 key pillars: good food and good life. And we will use that to grow our net sales from $32 million to $125 million over 5 years. Under the good food pillar, you can see that we're focused on 3 key occasions: in cooking, in entertaining and in desserts. And those occasions offer an opportunity of $7 billion in addressable market. In the good life pillar, we will enter new verticals, continuing to build on the recently launched MAGGIE Living range, and will be focused on the kitchen, the home and the garden. And those categories online present an opportunity of over $5.8 billion. All of that growth will be underpinned by an investment in master brand advertising so that we can fully leverage our advertising spend to drive all of these key pillars. We will ensure that our content remains fresh and engaging and exciting on our social channels, which are our owned channels. And we will make a PR opportunity out of our Food Club by ensuring that it's integrated into our marketing investment, continuing to build on the already loyal base that we have following the brand. I'll now talk about the good life -- the good food pillar. So the good food pillar is all about being really focused on our core categories, across cooking, entertaining and desserts. And the main sales driver here is in the supermarket channel, but the products, solutions, bundles and gifts are also offered on Maggie Beer online. You'll see that in FY '24 and FY '25, we're shifting the focus from continuing to add lots of rotations to our current 4 categories to actually entering new, large and growing categories to build scale for the brand in supermarkets. At this stage, I can't share further details about these categories. I'm sure you can appreciate, we operate in a very competitive and dynamic market, and I'll be able to share more with you as we get closer to the launch dates. In terms of the good life pillar, this is a really exciting opportunity for us to bring Maggie's Essentials for the kitchen, the home and garden to share with Australians in their own kitchens, homes and gardens. So building on the already launched small range of MAGGIE Living Essentials, we will expand that offer in FY '24 into baking and cooking. We'll expand the offer in home through table settings, baskets and products for the entertaining occasion. And later in FY '24, we will also expand with a range of Garden Essentials. And if you have Maggie Beer's cookbooks, you'll see that there's always a big nod to the garden and using seasonal produce, and this is a great way for us to share Maggie's favorite gardening products with our loyal customer base. The expansion into good food and good life, as I said, will be supported by a marketing campaign that consolidate our existing spend into creating a real focused omnichannel approach that is leveraged across all of these pillars of expansion. I'd now like to talk about the third pillar of our strategy: e-commerce. In e-commerce, there is a huge opportunity of untapped potential. To realize that, we first need to focus on strengthening the foundations. I've already talked about the opportunities to deliver operational excellence, and we're going to look at every part of our operations end to end. We're also going to be focused on delivering exceptional customer service at every single touch point. And we're going to be looking at non-digital channels to create awareness of the Gifts Australia, Hamper Emporium and Maggie Beer online websites. We've seen other online e-commerce businesses have great success by leveraging non-digital channels to further drive awareness of their digital offering. Secondly, there are opportunities for us to improve the conversion on our core business. So we have really strong conversion on desktop. We have an opportunity to optimize our conversion rates on mobile. So we will be refreshing our websites to take a mobile-first approach and realize that sales revenue growth. We will also -- we are also expanding our digital capabilities so that we can monetize a significant database that we currently have. In Hamper Emporium alone, this database is almost 1 million consumers. So we will be able to target those customers and segment those customers to further monetize that database. And we will also reset our approach on corporate sales, which has been our focus, and we see an opportunity to develop a B2B proposition across a number of verticals, and I'll be able to share more on that down the track. The third pillar of our e-commerce strategy is to develop new offers and verticals. We will continue to keep the range fresh to meet the evolving market needs. And we have an exciting new range of products that will be launched in time for [ father's ] days. And in addition to that, we are going to be trialing on one new vertical and one new partnership before the end of FY '24. And again, these are commercial in confidence at this stage, but I'll be able to share more details with you down the track. To achieve those 3 pillars of our strategy, we recognize that there are some important enablers in the business. The first key enabler is people -- people and capability. And that's about adopting an owner's mindset to ensure that everyone in the business knows the business and are spending every dollar like it's their own. There are also capabilities in innovation, Data and Analytics that we will refine and further develop so that we can achieve our aspirations and implement our strategy. I've talked about the importance of utilizing our brand and marketing spend differently for brand-building initiatives for ensuring that our content continues to be fresh and relevant and exciting and for advertising production, so that we can leverage the development of our master brand marketing communication. And we will continue to develop our digital ecosystem. To deliver exceptional customer experience, we will refresh our 3 websites, and over time, we will continue to refine our tech stack to ensure that it supports our strategy and growth ambitions. So in summary, the business that we have today has really strong assets with significant untapped potential. Our vision is about championing the joy of Australian food and culture in gift to realize an aspiration of creating a $300 million net sales revenue business that has strong margins and strong return on assets. And we will do that by reimagining the assets of the business by reimagining them individually, but more importantly, by reimagining what they are as a unified force, optimizing and unifying our assets to ensure that we're being really efficient in our operations. Expanding the Maggie Beer brand through good food and good life and scaling our e-commerce platform. And we will do all that by being really focused on the key enablers and continuing to acknowledge that we have a really strong balance sheet in place. So that concludes my presentation. I'd now like to open up the floor to a Q&A and I'll be joined by Reg Weine, our Chairman; and also Eddie Woods, our CFO.

Hi Kinda, Can you hear me?

Yes, I can. So i'm just trying to...

My name is David. I'm from [indiscernible] Daily. I was going to ask about this change with Paris Creek because it's quite a different -- it's quite a strategic move and definitely different from what the company was doing a year ago. I mean what's happened over the last 12 months with the brand? And why now is a good time to bring it back into the fold that would be a greater parent company?

Yes, sure. Thanks, David. So Paris Creek found, as we've looked at that asset and as we've looked at our growth plans and the performance of Maggie in cheese, it's become really apparent that asset actually has been strategically important for realizing our growth ambition. So we're seeing really strong growth in customer appetite for the 4 chains and other dairy premium dairy categories, and we're seeing success in the Maggie Beer brand across those categories. So we see a really great opportunity with an asset that we have today with a small amount of investment, we can unlock a significant opportunity and leverage that across the Maggie Beer brand.

Thank you Kinda, it's Kingsley here. I'm a shareholder. Just a follow-on question to that is, what kind of investment in dairy capability do you need to make so what sort of capability do you have today? And what sort of step change do you need to invest to get to your desired aspirations?

Yes. Thanks, Kingsley. So firstly, we will be investing in the cheese asset, so white mould cheese capability and capacity from a capability perspective is very much around automating that asset. And from a capacity perspective, it's about enabling us to bring in-house the Maggie Beer products and to also allow headroom for us to further expand those products in supermarkets and also online. So the current plan to-date is to invest in the cheese making capability and capacity. There is an opportunity for us to better utilize the current capacity and capability we have on the yogurt side and down the track, I probably expect that we will likely make an investment in the yogurt asset as well. However, the capability that we have there today is still underutilized even as it is.