Organto Foods Inc. (OGO) Earnings Call Transcript & Summary

So welcome, everyone, to the Organto Food webinar. Today, we will be hearing from Steve Bromley, Chairman and CEO; and Rients van der Wal, who is CEO of Organto Europe. Just before we get started, a couple of things first. The presentation can be found on the Organto website. So if you don't have it, feel free to go ahead and take a look. And just wanted to point out the forward-looking statements. So take a look at those. And everyone's microphone should be muted, but just maybe go ahead and mute them, so there's no distractions. And I will turn it over to -- I believe, [ Panos ] are you going to start things off?

No, I'm taking it from here.

Okay. Perfect.

Well, good morning, everyone, and thanks for joining us today. I appreciate you taking time. As Deborah mentioned, I'm Steve Bromley, Chairman and Interim CEO. I'm joined on the call by Rients van der Wal, who will be presenting as well. Rients is our Chief Operating Officer and CEO of Organto Europe E.V., and the guy that is probably more educated in what's going on with COVID-19 in Europe than any of us here in North America. So we'll have an opportunity to hear from Rients. So also on the call is Peter Gianulis, our Executive Vice President. Peter won't be formally presenting today, but will be available for any questions as they come along. So what we wanted to do today was -- for those who are new and have not joined one of our calls before, just update you on our company and our business model and the markets that we're serving, share with you some of the learnings that we've had from Europe with regards to COVID-19. There's certainly been some trends that have appeared, and we'll share those with you. And then talk about how our operations are faring. In this time, which, fortunately, we're in the food business, there's a lot of businesses that you wouldn't want to be in these days, we'll take a look at the business going forward and then open things up to Q&A. So with that, a little bit about Organto Foods, just as a brief reminder, we're an integrated provider of fresh organic and conventional vegetable and fruit products. Key there is fresh and organic. I should mention, I think if it's not known, we're listed on the TSX Venture Exchange and our symbol is OGO. We're all about serving the healthy living and healthy eating markets, and those are fast growing as consumers today are really focused on what they eat, where those foods came from, et cetera, et cetera. And that may have declined a small amount during this outbreak. But long term, we believe that healthy eating and healthy living is a key ongoing trend for years and years. Over the last 18 months, we've repositioned our business model. That has resulted in record results for the company, and we'll talk more about how we see Q1 shaping up. But clearly, the new model that we've put into place is demonstrating results as we expected. What is that model? We have an asset-light business model with diverse certification sourcing, logistics, processing and distribution expertise. Essentially, we are a link with the market knowledge and supply chain expertise that we have. We are a link between suppliers and growers around the world and end markets. We do not own farms or do our own farming. We do not own processing plants and do our own processing. We don't own packaging plants and do our own packaging. That was our old model. Our new model is to do that using strategic grower and processing partners around the globe. And that's proved to be very effective for us and we believe will be very effective as we work through the impacts of COVID-19. We have a branded and a distributed white label product offering. Our brand is the I AM Organic brand. We'll talk about that in more detail, but we're really excited about what we can do with the I AM Organic brand. We have a diverse customer base. We serve customers in 10 European countries, and those are noted on Page 5 on the presentation that's on the screen. And we have a global supply base. So we have growers in countries in -- growers and processors, by the way, in Latin America, Africa and Europe. So an asset-light business model, leveraging our go-to-market and supply chain expertise to bring fresh organic vegetables to, initially, the European market from supply sources in Latin America, Africa and Europe. This details in a little bit more our organic vegetables and our organic fruits. On the vegetable side, asparagus, fine green beans, snow pea, sugar snaps and ginger. Our business model originally started with a focus only on green beans, peas and snaps, so we've expanded on the vegetable side. And on our fruit side of things, we didn't have any in our old model. And today, we're active in avocados, blueberries, blackberries, passion fruit, mango and others. And why did we expand? Well, that makes us more relevant to more customers. It leverages the growers that we have who have more than one crop, and it leverages our overall supply chain expertise in that we can put more product in shipments versus less. I mentioned our brand is the I AM Organic brand. We have that for the European markets, and we're continuing to expand markets that we can use the brand in. It's been very, very well received by retail. We've been slower in rolling out the brand, given that we need solid, solid supply bases in place before we go to branded products because you don't want to be shorting your brand at market. We're now in that position with a number of products and are starting to roll out the brand. The beauty of the brand is that the margins are a significant multiple higher than if we're doing distributed or private label product offerings. So obviously, key to our long-term plan is to continue to develop out the brand. And lastly, on our integrated supply chain, we work with strategic growers and supply chain partners around the globe. In doing that, we're able to deliver quality product with complete transparency. So our transparency is critical here. And by being involved with partners in every step of the chain, we are able to clearly detail where the product has come from and all that we need to provide a transparent supply chain. Regions that we do deal with, Colombia, Morocco, Peru, Mexico, Argentina, Italy, Zimbabwe, and that continues to grow. And we really think that our asset-light business model allows us to move between these geographies much more easily. So that provides us with flexibility and scalability. So we'll talk about scalability later on. But also from a flexibility point of view, Rients will talk about how important that is as we look at what's happening with COVID-19, because different geographies and different countries are being impacted in different ways. So our ability to be flexible and not be locked into just 1 or 2 growing regions is really critical as we move forward. So that's a little bit on our business model, fresh fruits and vegetables, organic asset-light business model, serving grower -- serving customers in Europe with supply from Latin America, Africa and European markets as well. So along came COVID-19. Life was great, and then along it came. The interesting part is that it's moved to Europe much sooner. It became much a bigger deal in Europe much sooner than it did in the U.S.A. So we just wanted to share what we've seen and then talk about our operations at the same time. So obviously, the impact is extensive. This is a global issue. And the market dynamics and purchasing patterns are shifting all the time. At the bottom of -- on the left-hand side of the page, when we put this together yesterday, we had 734,000 confirmed cases. That's now 803,000, and so it continues to grow. So the impact is extensive. But we do need to eat. And that's where we come in. In the first box on the right side, I think the important quote is that COVID-19 may have limited our travel, and they might be subject to increased economic pressure. But people need to eat. And we've certainly seen that, and governments have made it a priority to keep supply chains open. So that's still the benefit of ourselves. Clearly, buying patterns have shifted dramatically as people stock up on supplies. And we're going to spend a little bit of time and talk about that because there's some learnings from the statistics that we have. And most importantly, there is currently no evidence that food is a likely source or route of transmission of COVID-19. So we need to eat. And as long as you take the necessary precautions, it's safe to eat. Talk a little bit about the phases and the changing purchase patterns as we go through phases. And we've all heard about the pantry preparation and no toilet paper and all of that sort of stuff. So there was an initial focus in pantry preparation to shelf-stable foods and healthy foods, not -- pardon me, not healthy foods, health and safety products. So all the wipes and sanitizers and all that sort of thing. And in the pantry of preparation stage, there was a lot of loading of shelf-stable and long-life products. So all of a sudden, soups were a big seller again, Kraft Dinner was a big seller again, pastas, dry products. Anything that had a long life certainly spiked. And we'll show you some statistics on that because it's happening in North America, and it has already happened in Europe. And then after pantry preparation, we get into the quarantine living and restricted living, which is where we are now. And certainly in Europe, most countries are advanced and well into Phases 4 and 5. And we've really seen the consumer purchasing habits shift through these phases. We did see the initial surge. And now we see healthy eating options increasing in demand as we move into those later stages. So to give you -- and just before we show you some stats, even in Europe, countries are in different phases. Italy schools -- so Italy kind of shut down at the start of March. France, second -- in sort of the second week of March. Not all European countries are totally shut down with different measures in place. Rients can talk about what it's like in the Netherlands, which essentially hasn't shut down, but in many aspects is under a very strict operating requirements. The point here, though, is that we really didn't see this sort of activity in the U.S. until 2 to 3 weeks later. So we've had a little bit more experience dealing with COVID-19 reality given that we're operating into Europe, and that's 2 or 3 weeks ahead of North America. So we talked about how the purchasing patterns changed with the phases. And this is a good example, sort of when was the inflection point? So the stockpiling begins before the lockdowns. And so in Italy, stockpiling -- Italy is the dark blue line, you'll see that stockpiling started the week of February 16. These are all consumer product goods, by the way, so not necessarily just food. But the stockpiling begins and then it starts to drop off. And then you see France start a week later and climb. And when we get to substance schedule, you'll see that, that consumer products goods stockpiling starts to fall off. So we certainly did see that heightened consumer demand at retail driving stockpiling in Phases 3 and 4. And the statistics that we're showing you are retail-oriented. Our customer base is retail-oriented. Obviously, the numbers go hugely the opposite way when you start to look at food service and eating out of the house. And then what you see if you extend this out further is the start of -- if there's such a word in this time that we're living in, stabilization. But what you do see is that the shelf-stable products continue to fall off, packaged food and frozen foods. And you see the growth of dairy and fresh foods. They grew at retail through the whole time. But we've kind of gone through that phase of eating soup -- or stocking up on soups and Kraft Dinners and shelf-stable products. And now it's time to work at getting some of the fresh nutritious foods back in. And so we've seen that with demand with our customers. The demand went up immediately when all this started, and it's continuing to stay strong as' companies like ourselves work the supply chains to get the foods there. And Rients will talk about that. It's not perfect by any stretch of the imagination, but the good news is governments have helped kept supply chains open, and we've managed to keep food moving. So pantry loading, shelf stable, followed by demand for fresh and food and organic fruits and vegetables. And just to wrap up on this, you're seeing the same patterns start to emerge in the U.S.A., with the inflection point being around March 1. You see beverage and -- pardon me, packaged sort of consumer products spike ramping up now with a slower rise for fresh foods. And I suspect a couple of -- 2, 3 weeks that we'll see that trend reverse. The stockpiling will have normalized somewhat and the demand for everyday fresh and nutritious foods will spike back up. So anyway, a lot of statistics there, but we just wanted to share with you, that's the experience we've seen. That's the mode that our business has operated through. So with that, the guy that's been operating every day and who's living in Netherlands, in one of the highest incident areas. I'll turn it over to Rients and he can fill you in on our markets and what we've -- sort of the market evolution that we've had and what we're seeing and, then follow that up with how we're operating. So Rients, over to you.

Thank you, Steve. Yes, as Steve was indicating, we serve the European market at the moment. Within the European market, consumers remain very much focused on health and wellness and sustainable and transparent foods. And we don't believe that COVID-19 will change anything to that, I think it will only reinforce it. And organic fresh vegetables and fruit is the largest category within the organic segment. I think good to note as well is that an average European retailer is between 6% to 8% in their offering in terms of fresh organic fruits and vegetables, and are very keen to increase that offering. Our markets during COVID-19, what we see is that the demand for food at retail has increased, mainly because -- well that's the key channel which is open for consumers to consume and to buy their products. Important to note is that normally, traditionally fresh produce goes for 70% approximately through a retail channel. And right now, well, all of the consumption is through a retail channel. As Steve also indicated, the initial focus was on pantry loading and packaged and shelf-stable foods, and that's now transitioning to fresh nutritious foods, including fruits and vegetables. And of course, we expect also an increase with that -- with Easter coming, which is quite a big moment traditionally in the fresh produce markets. And of course, same story, everybody will be consuming from their homes. So there will be a high focus again on the fresh products. Also, at these times, we feel that it's the moment to build a relationship with the retailers, with your suppliers or your trade partners to ensure that everybody can operate, can get the right results, even in difficult times like this. And I think important also to indicate is that if we look back on March, which was already a month for us with COVID-19, our revenues are expected to be the highest revenues of the first quarter. We work hand-in-hand with high value of strategic growers and supply chain partners from all over the world. We work with products from various regions, including Colombia, Morocco, Mexico, Peru, Argentina, Italy, Zimbabwe and other countries in order to try to complete a 12 months per year supply for our customers. I think also important here to indicate is to give a few examples on how we manage the distribution even during COVID-19. Best example here is -- to give is Italy. We work together with a grower in the northern part of Italy. Their season for green organic asparagus goes from week 10, which is the first week of March, up until week 20, which is the second week of May. And our program has not been interfered with or delayed for any moment because of COVID-19. While they -- in that northern Italian part, it was basically the first area within Europe where COVID-19 really, really took off. So I think it's a good example to show that it's not only a statement from national governments and from European governments that food distribution has top priority and needs to continue. We also see it in practice in our asparagus. To take it across the water into Colombia, for example, same story, but behind, of course, on the curve when it comes to COVID-19. But we don't feel any interference in terms of the supply from there. We actually have 3 containers of avocado on the water on its way to Rotterdam port, which will start arriving as -- with us from basically the second week of April. And we don't see any interference there either. The ports are also operating exactly the way how they normally operate. That being said, of course, everybody is naturally under pressure, but they continue to operate and prioritize all the food distribution. And another good example is on the side of airfreight. A lot of passenger carriers have reduced, of course, their flights internationally. I think even the domestic flights in the East African region stopped already in the -- on the 24th of March, but cargo is continuing. And a good example of that is that we imported in that same week. Last week, we imported 80 pallets of avocado from Kenya, which also is again another good example on how food distribution continues. A big advantage that we have in our asset-light business model is that we have a lot of flexibility in terms of following basically the right seasonality of our sources, et cetera, but also trying to see, okay, if there's a certain issue in a certain region, we have the flexibility to move. And at the same time, we have a lot of scalability as well for the future. So to talk a little bit more about our supply chains during COVID-19, we already took the decision a couple of weeks ago to let all our staff work from their house. We have a very sophisticated ERP program, which enables us to manage our transactions, our purchases from a traceability point of view, from a distribution point of view and from a profitability point of view from any given location in the world. And it was from -- for us, not such a big decision. Basically to say, okay, staff safety goes first, so we let everybody work from their homes. And at the same time, with a lot of daily commercial calls and team calls, we try to make sure that we don't lose the traction because of not sitting together. Of course, we don't share coffee moments anymore within the team. But considering the situation, I think we're very well equipped to execute on our business. Again, also all of our supply chain partners, LBP, DOB, our warehouse partners have taken their precautionary measures to maintain their operations. To give you an example, one of these measures is that they work in 2 shifts to make sure that they reduce the number of staff required to operate but also spread the risk for the staff. So also on that side, we see that operations are maintained, food integrity and everything is all in place. So I think it's very challenging times for everybody around the globe. COVID-19, it's a challenging situation. But for us, it's a business we feel that it's our obligation towards our customers, towards our suppliers to try to continue to operate, to deliver all the products in good time to our customers, to move the fresh produce from our suppliers and to try to create the best sort of results for everybody in the supply chain. With that, I would like to take it -- get the word back to Steve.

Great. Thanks very much, Rients, appreciate that. And I want to thank all the team in Europe for the hard work that you guys have done in keeping operations moving forward in a really positive manner during unbelievable times. So just looking forward, we did release some time ago that we realized record revenues and margins for 2019. We saw strong revenue growth in the last 2 quarters of the year. Really, this growth started in the third and fourth quarters. The third quarter having revenues of about $1.9 million, fourth quarter in the range of $1.6 million at positive margins, which was good after a couple of years of negative margins due to inefficiencies with the old business model that we had. So that was all very positive. And last night, we -- in advance of this call, we did announce that we're far enough into the quarter now to know where we're at. Our first quarter will be another record revenue quarter for the company. And that's even with the early onset of COVID-19 and the great work that our team have done in maintaining operations in these challenging times. So we'll be in the ballpark of $1.6 million for the quarter, $1.6 million to $1.65 million at positive margins again. And this will represent our third consecutive quarter of record revenue and margin growth. So we're really seeing continual results from our repositioned business model. And it's really encouraging that we were able to do it at an extremely tough operating circumstances in the European and global markets. And so it really does validate the business model that we have. And Rients talked about our flexibility, and I think our ability to be flexible is really important as we work through it. And I think also very important to note that we've done it in a very tight working capital situation. Our working capital is very tight. And so we focused every dollar on continuing to move the business forward and continue with the traction and continue to meet our obligations, which has been done, but has been difficult. I know we've talked in the past, but one of the beauties of the new asset-light business model we have is that it's not overly -- it's not like every time we want to make a step change in the business to grow it, that we have to go out there and invest in more farms and more processing facilities and more packaging facilities. No, we invest in the working capital to do that and we leverage our relationships throughout the supply chain to manage it. And so we've said that, look, for every dollar of incremental revenue, we need 10% to 15% of -- in working capital in order to fund that. So for a $10 million lift in revenue, it's $1 million to $1.5 million or 10% to 15% working capital that's required. And why the difference in what's required? Well, if we can get products on an airplane and get them to our markets and get that turned around in a week, the amount of working capital is a lot less than if we have a product on boats. So Rients mentioned that there are containers of avocado on the water coming from Colombia as per schedule. My apologies. That's on the water. Those products are on the water for 4 weeks. And so we have to pay a little bit -- we're paying more earlier. And so those are some of the impacts on whether it's 10% or 15%. But it's really efficient to return on invested capital market, a model that we now have in place. And obviously, with the additional working capital, we can accelerate the growth of the business substantially. So looking beyond COVID-19, we believe that the long-term opportunity remains for our business. I think we all acknowledge that life will look a little different, but the reality -- for all of us coming out of COVID-19, but we'll still all want to be eating and we'll still all want to be healthy. Health will be bigger and probably more important than ever. And so we still continue to see a great opportunity for the company as consumers are seeking healthier food, food options. And retailers are expanding their availability in order to meet that supply and meet that demand. Of course, a lot of that demand being driven by the Millennials and Gen Z, et cetera. It's a complex and fragmented supply chain. And so retailers often are not wanting to have to dive back into that and rely on companies like ourselves to bring those products to them, so that's our opportunity. And our ability to maintain transparency and supply throughout the -- that chain is very important to the retailers. So we're able to track and understand where a product comes from and how it's got to the market, which is all very, very important. There are a limited number of brands in the value-added fresh vegetables and fruit categories. And over the next year, we intend on leveraging the I AM Organic brand and driving it across our business. The beauty of that is that we're developing brand equity, and more importantly, higher margins, which is important as we move forward. And while probably not on top of mind today for a lot of you, we do have a very fragmented industry. And we're keeping a very close eye here because there may be some excellent opportunities to consolidate this as not everyone succeeds through COVID-19. And we're also having discussions with other industry players at this time around opportunities to consolidate and build a larger leader in the market in Europe. So just to sum up, we're serving fast-growing markets. COVID-19 hasn't slowed those markets down, and we believe that markets will continue to grow for some time. We have a branded and distributed product offering. You need to have that distributed product offering in order to be successful with a brand. And so we've built that distributed product offering out and now are in a position to grow the brand as well. We have an integrated year-round supply for key organic products. Our business model is scalable and it's asset-light. So it's flexible as well, and we can generate excellent profits from it. And we have a great team in place with experience both in North America and Europe. I would say that our team in Europe has as much organic fresh fruit and vegetable experience as anybody that I know in the country. And so I think that positions us really, really well. And of course, we have strong management ownership in the business. So in summary, we think we're pretty well positioned to operate during the pandemic and, of course, after COVID-19. So with that, I wanted to make sure that we opened it up to questions. Now this is the first time for us on a webinar. So Deb, can you give us some guidance on the question and answer period?

[Operator Instructions] Or alternatively, if they want to e-mail them to me, I can post them. My e-mail is [ [email protected] ], in case anyone doesn't have it. I think we have one from Tom Burke. Kenya as a new supplier, how is the quantity and how many global sources of avocados have secured globally? And then margins?

Rients, why don't you talk about the various sources that we have for avocado? And how was the quality from Kenya, I guess, is the next part of the question and how are the margins?

Well, I think to answer that question, there are many seasons in many countries of supply that we have availability, from a network, from whether that's already a strategic developed source or it's from our commercial team from the past and something to develop for the future. But important countries to mention a few, Peru is a very important country. Colombia is important. At the same time, Morocco and Spain are important players. And there's a lot of sources still around there to mention. Chile is also important. South Africa. So there are quite a lot. Kenya is -- if I would rank Kenya in terms of quality, it's not the highest quality perceived in the market. It's not poor quality perceived in the market. I think it's a little bit a midrange. It's for us a very workable quality and for our customers as well. We did quite a lot of Kenya avocados as well at the back end of quarter 3 last year. So yes, it's something that we are able to work with quite well. It's the way -- how we have used it right now, it's more as a filler for the gaps that are falling between certain supply windows or an immediate necessity to step into the market. And of course, the reason why we can use Kenya well for that is because the air connections are quite strong and good from Kenya because of flowers and vegetables.

Rients, that was really interesting on -- when you were explaining to me the Kenyan air transport and why, even with domestic travel being cut and flights being cut, cargo is available. It's interesting as the same thing happens in Colombia and a couple of other places. With the flowers?

Yes. Absolutely. I think what we experienced is that on the 24th of March, Kenya Airways, which is one of the leading regional carriers in the East African and the Southern African region, canceled all their international flights on the 24th. It's important to indicate that there are passengers routings, but passenger routings -- they take passengers and cargo. So an average cargo or an average passenger flight can take about 40 tons of cargo. So of course, there's definitely an impact when you would stop, for instance, into Amsterdam, 7 flights per week that Kenya Airways does into Amsterdam, 7 times, 40 tons. Of course, that's an impact on capacity. But at the same time, there's so much freight air activity going from Kenya into Europe. And average freight that takes about 110 tons of cargo. So yes, it's an easy calculation to see where that leaves you if you need to compensate for that. So of course, we feel that the routes are a bit more under pressure because normally, you have more choices, more availability. But at the same time, yes, for us with food, you can also say that from Kenya, flowers are being less exported because people are more focused right now on fresh and healthy foods and not so much on luxury products that flowers are. So whatever capacity we lose out of Kenya in terms of passenger flights falling out, there's also a reduced capacity needed because of the flowers. So all in all, it's for us still a very manageable situation.

A couple more questions. So one is, do you anticipate increased market resistance on long supply lines, i.e., by local movements are gaining traction in post-COVID-19 world?

Sorry, I'm going to let Rients take that one since I've got something in my throat here.

Sorry, could you repeat that question one more time for me, Deborah?

Sure. They're just asking about how like buying local food movements are getting traction in a post-COVID-19 world? And do you anticipate increased market resistance on long supply lines?

Let me go first -- hey, Rients, I'm just going to go first on the buying local, and then let you -- there has been quite a movement to buy local well before COVID-19. And so that is reality. And it's not -- and it won't slow down after COVID-19, in my mind. The reality is that many, many products, especially fruits and vegetables, cannot be grown in certain geographies on a year-round basis. Organic asparagus is a good example. We're in the local European season right now, which is why we're sourcing from local growers, i.e., Italy and others. When that local season ends, there's no more organic asparagus in that country. And if you wanted, it's got to come from somewhere else, and we'll bring it in from supply partners around the world. So buy local is not new and it's certainly a trend and it will continue. And our model is such, given the flexibility that when it's local and it's available locally, we'll acquire. We'll be dealing with grower partners there when it's available local. And when it's not, we'll use our global supply chain. Rients, I'll let you take over from there.

Yes. I have nothing much to add to that, Steve. I think you're spot on, absolutely. And I think it's -- I mean to buy local is definitely a trend from before COVID-19 already. Whether that trend will be stronger after COVID-19, I don't know. I think it's -- you can just as well say that the need for us to look at the world more from a global view is also something that COVID-19 can cause. But either way, for us, because we are just as active on local sources as on overseas sources, we don't see that negatively impacting our business at all.

Thank you. I've got one question that was e-mailed to me. So what effect do you think the new extended European quarantines might have on your operations over there?

Well, I think maybe -- I think the impact will be relatively low. I think the only challenge that we have from time to time, and I don't mean this in a funny way, but is that we missed the moment at the coffee machine together. Because there's a lot that you gain from direct interaction with your colleagues, being able to look each other in the eye and not through a screen. But apart from that, I mean, the unusual situation. So that is something that we can quite easily get over for the time being. Apart from that, I don't think extended regulations around COVID will be a massive challenge for us. A lot of borders are already closed in Europe, but they're not closed for goods. Just what we said in the presentation earlier, Italy is one of the greatest examples for that. And yes, I think we have to see right now in the Netherlands, the country is partly locked down. It's -- the government is advising people to stay in their houses, but it's not enforcing that. It's counting on people to take responsible choices themselves. We see a lot of creativity around us. The restaurants are changing into pickup places for food, so there's a lot of creativity that people are bringing. And again, 70% of our distribution has always gone through retail. And we think that retail will remain strong, and the focus for people to eat healthy and to even look more critical to how something is being brought to them, the transparency that they require on a supply chain will only benefit us as a business in the long term as well.

Thank you, Rients. A couple more questions. So who are your largest customers? And does any one customer make up more than 10%?

I'll let you handle that.

Yes, sure. We deal with a traditional retail, think like Coop Group in the Nordics. So that's the northern part of Europe: Denmark, Sweden and Norway. We deal with online retailers. We deal with traditional organic specialty retailers. I think between the Netherlands, Belgium and Germany, we have a coverage of about 80%, more than 3,000 points of sale. At the moment, I think we have a rather -- or not at the moment, but we have a rather healthy mix. There's no customer which is beyond, I would say, 25% to 30% of our total. So it's a healthy mix. We're healthy in terms of the geographical spread, normally next to the retail segmentation that we have because we have online retail, as I said, specialty organic retail and traditional retail. Normally, we also have the food service. And everything next to that, that part is not there at the moment, but of course, will come back in due time. But I think the mix is very healthy, and it's already proving to us that even -- because we're active in so many different countries within Europe, it makes us quite solid in terms of the distribution that we have.

Thank you, Rients. I think that this is a question for Steve. When you raise new capital, what is the return on that marginal new capital?

Well, I think the best way to look at that is, let's assume that you're raising capital for growth and be very, very conservative here, and assume that you make 10% margins on the incremental sales that you have. That returns $1 million. And the investment to do that -- that's $1 million annual, and the investment to do that could be in the range of $1 million. Could be a little less, could be a little more, depending on what the supply sources are. Worst-case scenario, assume that's costing you $1.5 million, that means you're getting your money back on a simple basis over 1.5 years. So it's a nice return. And the quicker -- and by the way, and the quicker -- the more oriented the product mix to quick turn, the lower that invested capital and the higher the return. So in a perfect world, if everything could be put on a plane on Monday and sold by us on Friday, it's less than 10%. That's a perfect world. And unfortunately, none of us have a perfect world. So it's the mix that counts. But to compare that to investing in farms and irrigation equipment and investing in plant expansions or new plants in geographies, we don't want to own a plant because we want to source from multiple geographies and just use sourcing and supply partners in those regions so that we can have this -- we can have the return. And one of the things that I mentioned is the lower margin that you'll take on some of these products is indicative of the quicker turnaround. As we move into the branded products and move the margins to 25% and 30%, your customer mix is changing. And anybody that deals with retailers know that they want terms and they want longer terms. So even though your margins could grow to 25%, the working capital invested will be at the high end, right? It will be up at that 1.5 and maybe a little bit higher if it was all just for branded products. So while 10% margins may not sound really good, the return on the invested capital is very good.

Great. So one last question. Are there any supply possibilities from Ethiopia direct into Europe?

Well, I'll let Rients handle that. I can tell you that in my prior life, we were very active in Ethiopia with coffee and sesame. And it is an agricultural basket. And Rients, I just don't know how much work we've done in Ethiopia recently. So I'll turn that over to you.

Yes. Thank you, Steve. Yes, I think Ethiopia could be a very interesting source for us for the future. We have already had some discussions -- early stage discussions with a grower in Ethiopia who was very keen to grow some vegetable crops for us. So yes, I think climate-wise, there are a lot of possibilities within Ethiopia. There's a lot of organic -- or easy to certify organic land. There are good logistical options, especially by air as well. So yes, for sure, there are definitely opportunities for us in Ethiopia. Absolutely.

And Deborah, we see lots of opportunities from the African content -- continent, pardon me, period. We talked about Zimbabwe. Last year, we brought a grower on for organic beans, peas and snaps. We went through all of the work ups. We tested the markets. We brought the product. And Rients, correct me if I'm wrong, but it was Coop in the Nordics that marketed the product? The beans, peas and snaps from Zimbabwe? Rients, are you there?

Could you repeat?

Yes, I was just saying when we ran the vegetable trial out of Zimbabwe into the market, we used Coop to tend -- to market the product, right?

Yes. Coop Denmark, we did a commercial trial of 12 weeks. It was very successful. All of the products accepted very well, good rotations in stores. We basically took a project in Zimbabwe with no certification and well, we took it turnkey into an organic certified, socially certified, retail approved product within, and that was the advantage of the short-cycle vegetables. But we did the whole set up very, very quickly. We launched the project in -- started it 3 months after started the first distribution. So yes, I think that's very promising for us for the future, absolutely.

Right. And the point that I'm making here is we have that supply source. It's African-based, right, Zimbabwe, further south of Ethiopia. But we're not ramping that up just because of working capital at this time. So we've had to put our working capital, which is tight where you can get the biggest turn. And so we put it in other places. But we still have the supply source. We still have the supply partner. It's African-based, and we'll turn it back on. And they're ready to work with us to turn it on when we're ready. So yes, we would -- we'd be all ears to anyone with Ethiopian connections.

Great. And then can you tell us a little bit about whether you're looking at any acquisitions and what sort of things you're looking at?

Yes. Well, Deb, look, I mentioned that earlier. Look, it's a fragmented chain in Europe. I'll let Rients comment on this a bit, but there's only a couple of players over $100 million, which isn't that big. And then there's multiple small players. And we'd be very interested and have had discussions and continue to have discussions with groups that we know in the industry. And so that's very, very interesting to us. And we are having discussions with people. These things don't happen overnight, but certainly, we're having discussions with some interesting parties. And what we're looking for is companies that can do 1 or 2 things for us: create further depth in the categories that we're in or add new categories. And adding new categories becomes really, really interesting as we roll out the brand. So I mean, this is just a hypothetical example. But we don't have lemons, organic lemons. I'm just picking that one, pick a product. We don't have those today. And so if we have an organization that has the supply chain nailed down, we're comfortable with the supply chain. We can add that to our product offering. We can use our same customers. Most successful acquisitions are always proven by being over time. The most successful acquisitions are when you leverage the same customers. And so we could leverage the same customers that we're dealing with. And not only do we bring the line on a distributed and a white label basis, we bring them line branded under the I AM Organic brand. And so we're very interested in that. So it is a core part of our strategy going forward to -- as we had noted in the looking forward section of the presentation, we see a real opportunity here, and we're very excited about the opportunity to do that. And people that we spoke to are interested and excited about exploring opportunities with us. And lastly, these are not easy times for people and maybe some deals will come along. I don't know. We'll see. I hope so.

Thank you, Steve and Rients. That wraps up the Q&A portion of the webinar. It usually takes a couple of days to just have the audio and video cleaned up, but we will make this available to all the participants as well as the management requests this online. So thank you, everyone, for your time. And if there's any additional questions, please feel free to reach out to me or management team directly.

Yes. Deborah, I just would like to thank everybody for joining the call, and I really appreciate you taking the time and personally want to wish everyone safe and health. And we will get through all of this and find the other side, but these are challenging times. So on behalf of everyone at Organto, best wishes and we look forward to keeping in touch with everyone. So thank you.