Frozen food section is very competitive. Natural food isn’t as much. Mama Mancini’s is all-natural.

Prepared food section has higher margin because clients perceive it as a better product, similar to restaurant quality. The overall dish in prepared foods is higher margin (protein+sauce+pasta).

The company has close to 28 products right now (new products such as lasagna, ravioli, etc).

 “The key to our business is the central buying office” (talking about the retail clients)

CONVENIENCE STORES OPPORTUNITY

There are over 300.000 convenience stores in the USA. 

Currently negotiating with a convenience store that has 12.000 locations. If we’re in 2.000 locations (of those 12.000) and sell 6 hot items per day, we would sell 40 a week, so 2.000 x 40 = 80.000 per week. That’s a lot of business. If each item is sold for $1,8, that would mean $7,5 Million annually. The company is likely to be making ($40-$50 Million in 2020. If they were in the whole 12.000, it would mean $45 Million per year.

Manuel – If you land some big clients/contracts, and given that you have a maximum capacity of $75 Million, how do you proceed from there?

We use co-packers. They’ve been set up. I think we can handle additional volume. A co-packer is a plant owned by someone else and we contract with them to make a product according to our specifications (outsourcing). It increases our capacity significantly. We’re using them for finished raw material supply. 

Right now, we’re in the process of improving the operations in our packaging area. Reduce labor in the packaging area. The corrugated boxes take up a lot of space. They’re moving out to a supplier who will hold it for us and ship to us once or twice a week to eliminate that storage area.

That are will become a staging area for handling the finished product for additional deliveries. That should be completed by next spring. It’s not a lot of money.

We have financing for that. We have more than sufficient capital right now.

Manuel – There’s a big customer concentration (the largest client represents 40% of sales). What would it take to lose a big client?

If you’d lose something, it would be one product. We think that’s highly unlikely. Our future sales are with other clients which will lower the concentration. Every day is a new day, not based on assumptions of previous things you’ve done. Every day we need to earn our money.

Debt is $3 Million. Cash is close to $2 Million so we’re almost debt neutral. We have some warrants which will be redeemed so we should be cash positive without any debt very soon (end of the year?).

Regarding the warrants, what makes you so sure that they will be redeemed?

Many of them are $1, some are $1,5. Depending on the price of the stock, I think there’s a pretty good chance they’ll be converted. By our filings, you can see that several of them were by insiders. And I think that depending on the price of the stock, the $1,5 will be converted as well (insiders own the warrants). The expiration date on those warrants in middle of November.

Manuel -You’ve mentioned that you were looking for an acquisition target with a great product in the food service business, but with no presence in the retail business. What about the other way around? Why don’t you use the target to get into the food service business?

Absolutely! The perfect target would have a very robust food service business and relationships, and convenience stores relationships, but very little in the retail business and have very high quality products that matches our type of products and we would sell their products and they would sell our products.

Manuel – What would you say was the reason why you were not acquired yet? (the company has been actively looking for larger company to acquire it).

Because we were too small.

Manuel – Is that still on the table?

Well, it’s a potential. We haven’t decided what to do yet.

Manuel -The company is up-listing to the Nasdaq soon. This will bring more liquidity, more investors and higher awareness of the company.

For the up-listing, the share price must be above $3 for 90 days and $4 for a week. So there’s the likelihood for a reverse stock split, right? At that time, right.

Manuel – What would the annual cost be? Probably around  $75.000 to $100.000. additional.

The American beef council prints the price of various cuts of meat every week. It just shows you trends. Not of much use. 

Beef prices went up over 50% last May and June in about a 4 week period of time. You can’t call supermarkets and say “tomorrow we’re going up 20% and then the next week another 20%”, but overall we came through pretty well. Right now prices are coming back to normal, so I think we’ve absorbed that pretty nicely.