$TTCF: The next Beyond Meat

Tattooed Chef is a plant-based food brand. They have vertically integrated manufacturing and are available in stores like Target, Walmart, Costco, and Sam's Club. TLDR is below.

Fundamentals:

• 2021 expected revenue is $222m, expected net income is $2.5m-$5m

• 2020 revenue was $148.5m, net income was $41.5m (I think ~$40m was one time tax deduction)

• 2019 revenue was $84.9m, net income was $2.2m

• Current market cap is $1.34b

• Merged with SPAC $FMCI in October 2020.

• It's shorted to oblivion according to finviz, fintel, and iborrowdesk. 30% short float.

• 2021 Q1 earnings expected to report around May 8th.

• Insiders own a total of 48% of the company.
  

  • Recently, an insider director bought 250k shares on April 15th.

Qualitative notes:

• CEO Salvatore "Sam" Galletti is the founder of the company. He's worked in the food business for 35 years. It started off as a private family business. He was approached to go public via SPAC and took the opportunity because of massive capital injection to build out Tattooed Chef, the brand.

• Tattooed Chef is a new brand that the company started working on in 2017. Before this brand, they were only private label providers to stores like Trader Joe's and Whole Foods. They still operate these private label customer accounts alongside the Tattooed Chef brand.

• The company is entirely vertically integrated (namely, its manufacturing).

• His daughter, Sarah Galletti, is the Chief Creative Officer of Tattooed Chef. Her job is to design new products. The CEO said her core strength is getting designs out quickly and that is complementary with the company's vertically integrated manufacturing so that they can get the product out from design quickly.

• They've spent like 0 dollars on advertising. They developed a plan to hit 2 billion impressions in the form of 6 and 16 second videos in the first 8 months of 2021. This is the first time they're spending advertising dollars.
  

  • Small nuance: they spent dollars on product demos in Sam's Club. But that is negligible spend.

• They have 11 SKUs in Walmart, in over 2000 of their super centers. They started off in Sam's Club. They also have SKUs in Costco. They were given an opportunity to have 2 SKUs in Target, and recently in March 2021 they got approved for 6 SKUs.
  

  • The way the food business works in regards to shelf space is, the stores want to shelve products that actually sell. They have to meet sells-per-week requirements. They started off with smaller SKU allocation in Walmart and Target and after proving their products they've grown to the SKU numbers they have now. That's a very good sign.

• Twitter and Discord groups like Jeremy Lefebvre and Dumb Money post pictures of local Target frozen shelves being out of TTCF stock. Search Twitter for $TTCF and you'll see them. Also the comments on TTCF's official twitter account have stuff like "yo get the product in my target please, it's always out of stock" and "when you gonna be in europe please".
  

  • Youtuber Jeremy Lefebvre DM'd the TTCF instagram account asking something like "hey is this a production issue on your end or what? my target is always empty" and they replied saying something like "nah bro we just selling hella haha". Very good sign.

• A common conception is TTCF only produces frozen products. That is not true. They're already working on ambient products, designed by Sarah. The CEO said an interview in December that they should have their first ambient product out in 60-90 days (so sometime Q2 2021).
  

  • Note that they're not an ambient manufacturer, so they'll have to work with a co-packer. This is like their first dependency outside of their vertically integrated manufacturing.

• 2021 is about aggressively growing the TTCF brand and focusing on revenue. Before, the CEO ran the private business while always thinking about profitability. As a result, they've developed contribution margin quotas for each product they produce in their internal manufacturing. But now with SPAC capital injection, he can focus on growing the TTCF brand and get it into retail stores.
  

  • Before 2021, their only sales was the CEO and his daughter. Now, they've hired marketing teams to get them into more retail stores, namely an ex-Coca Cola national sales manager.

• Looking forward, Europe has a strong demand for their products as well, as plant-based proteins are growing in affinity. TTCF has 2 manufacturing plants, one in California and one in Italy. It's cheaper for them to ship ingredients from Italy to the US for their US operations. So they're looking to hire sales in Europe to get TTCF in stores there. According to their twitter, they're already in Costco UK.

Competitive edges:

• Most food brands in this space are not profitable -- they burn a ton of marketing dollars while their manufacturing costs are high. This isn't a problem for TTCF because they've built manufacturing infrastructure for themselves since 2010.

• The CEO views competition in the space as competing for shelf space. That comes down to having unique products. He says having Sarah as a creative and fast designer is a key edge to this.

• Vertically integrated manufacturing.

Risks:

• It's basically a startup building a brand but with a profitable base of proven internal manufacturing as it was used for private labeling and a strong balance sheet. With building a brand comes all sorts of scaling challenges -- capital allocation for marketing spend, hiring employees to do sales, operating in new stores, etc. So they'll run into a bunch of growing pains. But I can't think of anything major. And also it doesn't look like they'll need to do share offering any time soon to raise money, so that's good.

• Environmental conditions or macro conditions causes their ingredient chain to be more costly, reducing margins. I haven't dug into whether they're affected by commodity inflation yet, but because they own manufacturing I don't think it's a potentially big problem for them.

• The company's history is honestly difficult to follow. They were like 2 different names before Tattooed Chef. An infographic kinda solves the problem tho, linked in sources below. And also people think it's only a frozen food brand, but they're actually working on ambient food too.

• Recent news of the CFO leaving and a stock sell by the CEO give bad optics. But I think the headlines of these events make it seem way scarier than it actually is. The sale by CEO was planned.

News Clarifications:

• The CEO selling shares was to pay off debt.

TLDR:

• It looks super good on paper -- 50% YoY revenue growth, they're profitable, and only now they're tapping into advertising.

• In the CEO interview, he said "focus on aggressive growth" like a bajillion times for 2021. Its 2021 revenue estimate of $222m only includes current accounts of Sam's Club, Costco, Walmart, and Target. So given new accounts will happen, this revenue estimate is conservative.

• And given the recent SPAC sell off, I think now's a great entry point.

• Market cap is 1.36B, that's a 7.4 forward PS. Beyond Meat $BYND has 2021 expected revenue $630m, and trades at a 13.6 forward PS (Market cap of BYND is $8.44B). The comp just makes it seem like an extremely asymmetric bet.
  

  • If it trades at BYND's forward PS for 2021, then the share price would be ~$36.

  • My math for that is: 13.6 * $222m = 3b, share price at 3b would be ~$36.

  • But I personally think the revenue growth projections are very conservative, because the CEO said it only includes existing accounts, which is those 4 stores. Their 2021 aggro growth plan is to push into more retail stores.

• I tried their food too, bought it at a local Target, it's pretty good for a frozen meal and as a meat eater I can see the appeal.

• Obligatory rockets: 🚀🚀🚀

Position:

• 10,000 shares at $16.

Sources: (note, mods ban youtube links, so I have to give you manual instructions lol)

• Jeremy Lefebvre DMing TTCF on Instagram asking about out of stock in Target:
  

  • Search "I AM LOSING A FORTUNE TTCF STOCKS AHHHH" on Youtube and go to 11:22.

• 1 hour interview with CEO (yes, I watched the whole thing):
  

  • Search "Tattooed Chef (TTCF) CEO & President Sam Galletti FULL INTERVIEW at ROTH Webinar" on Youtube

• 2020 Q4 earnings report: https://ir.tattooedchef.com/financial-information/quarterly-results

Disclaimer: I'm not a financial advisor. I'm just a fellow rocket ship enthusiast. Apes strong together. DYOR.