This will be a very interesting tie up. A bit like the Gibio announcement, I think they are very constrained in what they can reveal about the deal. With Gibio they elaborated on the high profile backers behind Aerofarms etc - Jeff Bezos etc. As if to say Gibio also have such backers. With Freshero, they spend half the announcement talking about Tony Mahoney.
What struck me most, was the background of Freshero's CEO Tony Mahoney. Firstly he held senior positions in Woolworths, so is very well connected. At Freshmax, where he was CEO, he oversaw the growth of Freshmax to become the largest Australian + NZ independent fresh produce business. Freshero is not the 1st company he's set up, having previously founded Nutrano which, looking at it's web site, is also a very big fresh produce supplier. A quick google of Freshmax shows it employs around 630 people.
So Mahoney left Freshmax, the largest independent Australian fresh foods business, to set up this business. Coles & Woolies both buy from Nutrano & Freshmax. My take on it, is one of these chains expressed their desire to become involved in Urban Foods, knowing Mahoney's history they offered him contracts if he set up such a business. In this highly competitive supermarket business they need to stay a step ahead of their competitors. Likewise Freshero has to be highly competitive, need the best technology hence the JV with Rotogro. Interestingly they are not confining the business to Aust/NZ but SE Asia too.
Another comment from the announcement:
"conditional upon.......Freshero entering an agreement with a wholesale or retail partner".
This tells me he already has contracts lined up as I summised above. This would make sense before committing capital to such a venture. Remember he's previously held several senior positions in Woolworths over 10 years. Bottom line, these contracts are required to be in place before the JV goes ahead. Why put that clause in unless you're extremely confident of some major contracts - remember his connections.
An initial order of C$1-1.5m is nothing to be sneezed at (1 CAD = 1.05AUD) then a minimum 600 machines over 24 months. I'd say that 600 is very very conservative given Gibio are ordering the equivalent of 800 machines just for Cos lettuce in one facility for one city. It doesn't take too much imagination to see how many machines Freshero will need to supply multiple lines Australia wide & possibly NZ + SE Asia. The initial 100 machines is to be ordered during the training & testing period to me shows a big commitment and faith in the product & contracts, having probably already seen the Gibio testing results.
The 2 businesses where Mahoney was CEO, one of which he founded, are now both huge businesses. I see no reason why Freshero wont grow to be a similar size and Rotogro will be part of it, earning a royalty on sales + machine sales, management etc etc. I always thought RGI would be a multi bagger, still think we'll see a Dollar by years end, however 2 years down the track with this deal + Gibio, not even including the MJ side, I can see a market cap of well over $300 million and that's probably very much understating it. That’s 10x by the way.
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Keep up the great posts mate!
