How is it going with the recent acquisitions?

The acquired companies are doing very well. They have a lot of new business, and there’s a lot more new business coming. Right now, we have 2 major customers, we started selling for them. We believe we will have very substantial additional business. If the other 2 come true, it will be another 6 or 7 million dollars in business. But there’s more going on. I’m talking about 2 very likely prospects that should start in September.

T&L has been doing very well. The price of chicken impacts its business. It was very high, it has now come down and we haven’t lowered prices so the margins should be very substantial.

T&L operates on a lower gross margin, but their overhead is much lower as a percentage of sales.

In the case of the olives business, we’ve found new packaging for them and that should add $15 to $20 thousand dollars per month in profit, and we’ve raised prices about $10 thousand to $12 thousand a month.

CIF (the most recently acquired company) will add to the margin because when you put all the businesses combined, you eliminate intra-companies sales and we will add 11% to the gross profit. CIF buys the majority of their product from T&L. They’re a sales and marketing arm for T&L and other people. We’re paying $5 million for $1.5 million in profit (a valuation of 3.3?).

You had $70 to $80 million in capacity in your original plant. Where are you capacity-wise?

Our mix is changing, in our plant, to products that we assemble, but where we don’t make the components. So, if that continues, we have another $20-25 million in our plant (for Mama Mancini’s). We’re buying a new spiral oven, which is 500K dollars, it’s all financed, which will increase our capacity and efficiency. And we’re putting a second grill line in T&L, which is about $1.1 million. All of this will happen in the next 8 months. That will add another $15 million in sales capacity.

So, we’ll have around $150 million-$160 million worth of capacity with the additions. 2 years out, if all goes well, we’ll be looking at a major new plant toward the end of fiscal year 2024 – a year and a half from now (this was a big surprise!).

We’ll probably issue preferred stock to reduce debt. The preferred stock will be convertible at higher valuations (non-dilutive). 

But first, we have to get to the higher sales (120 million in sales run rate by the end of the fiscal year – January 2023). My guess is that we’ll be more like 140 million (!).

*Note from Manuel: This was a good surprise. Carl and the team are already thinking of how they will finance a new manufacturing plant and they are cognizant that the share price is currently depressed.

How is the new Meatballs in a Cup product going along?

The interest is going well. Final packaging that we need for the supermarket and convenience stores arrive on July 19th. We had to get special lids to microwave. The old lids didn’t work. We have a number of small orders and we have tremendous interest on the product. We’re selling out in QVC. In my projections, I’m estimating very low sales in meatballs in a cup for the year.

Going forward, if we do well, that category is, at least, $50 million dollars in sales. Can be sold to convenience stores, stadiums, colleges, fast serve restaurant, supermarkets as grab and go, and in club stores in multipack. It is so large of an opportunity, and it’s all branded, we have orders waiting. But I don’t want to have big orders right now. It’s a new item so I want to take it slow and be sure everything works.

COSTCO CAN BE THE BIG CLIENT. HOW ARE THINGS THERE?

The second pillar we have is going after the Costco business. We believe we’ll get much more business by the end of the year, but you need the firm purchase order. Right now we sell to one division of Costco in the North East in rotations (the product isn’t always present). Costco represents $30 million per SKU if we’re in the entire country. We’re way above the minimum sales level required by Costco.

A year ago we’ve changed the major pitch in the packaging, started doing horizontal packaging and not vertical packaging.

THE THIRD PILLAR

The third pillar of our strategy is the chicken products from T&L. They have a new item – grilled panini sandwich – and that will add a lot of new business. They also have turkey burguers. We’re going to introduce them to our customers and they’re going to introduce us to their customers.

WHAT CAN YOU TELL ME ABOUT THE NEW CEO

He is very active (only starting in September). I’m having him working on the project with the accounting department. We have a board member who was very high at Marriot but hasn’t produced the sale (he should have opened Marriot’s business to Mama Mancini’s). One of the things I want the new CEO to do is to work with that board member.

He’s very dynamic. 46. We started looking for a CEO last August with a firm. But we parted in March and we found this candidate through networking.

WHO IS GOING TO BE IN CHARGE OF ACQUISITIONS IN THE FUTURE?

We would have someone executive in our company responsible for acquisitions. You need to increase the number of managers.

WHAT’S YOUR OVERALL STRATEGY FOR THE FUTURE?

Our strategy is, over the next several years, to be the number one company selling fresh products into the meals-to-go section, or the fresh sections of the supermarkets. That’s a very big category, very fragmented, the margins are good, both branded and unbranded. There’s a lot of unbranded because the supermarket wants you to think that is made in the store. We’re 50/50 right now.

The strategy is to put together our sales teams – better. Publix is handed by me and will continue to be. The short term goal is to coordinate and integrate the companies. Old off acquisitions for at least 6 months, until we step on the accelerator again.

Maybe in the medium term goal, we’ll have higher margins as the costs come down and we don’t lower our prices, but then it will come down to the long-term 7-8%. We’re still raising prices.

CARL EVEN MENTIONED FUTURE VALUATION OF THE STOCK (which I usually don’t like)

If we do what we’re doing, the consensus on our strategy meeting (they just had a strategy meeting), was that our stock will be $4 to $5 dollars. We’ll be earning over $20 cents a share. I think at that level we would start acquisitions again.

DO YOU PLAN ON SELLING THE COMPANY ANYTIME SOON?

Anytime you think about selling the company you destroy your growth.

The way you sell a company is if someone comes in and says “I need you” and then you hire a company to find competing bids.

We tried to sell it a few times, we were too small so as the company is large enough, I’m not going to worry about selling it.

* At this point Carl mentioned Cliff Bar, which had an offer of $200 million back in 2000 and sold now to the giant Mondelez for $2.9 billion.

If any of those three pillars that I mentioned works out, it’s $50 million in sales and we’re pursuing the 3.

CONCLUSION (Manuel speaking now)

I first invested in Mama Mancini’s back in 2020. Since then, the stock price has gone up and down. As I write this, it’s down 15% from when I bought it. Does this mean that the company is 15% worse? Of course not. Sensible investors know that they should focus on the business, not the stock. And from my conversation with Carl, the business is going even better than I thought.

Yes, cost inflation is pressuring the margins right now, but listening to Carl – who has been in the industry for years – reminded me that this is just another cycle and that one day things will get back to normal.

I am happy that I own Mama Mancini’s. If I hadn’t invested before, I would be investing now.