For Q1 2022, The Real Good Food Company increased net sales by 124% year on year to $37.6m, driven by strong sales growth of its core products and expansion into the club channel as well as greater demand in existing retail accounts, said executive chairman Bryan Freeman.
"We expect growth in the retail channel to accelerate in the coming months as we introduce new products and grow the distribution of our existing core products. Our retail business, which is 100% branded, is on pace to achieve approximately $100m in net sales on a run rate basis, which is an important milestone," said Freeman on the company's earnings call last week.
Gross profit also increased 5.8% to $4.2m for the Q1 2022 driven by an increase in sales volume, partially offset by an increase in labor and material costs.
Freeman commented that the company expects its gross margins to improve with the additional capacity coming from its newly-opened facility in Bolingbrook, Illinois, which is expected to add $200m in incremental capacity by the end of 2022.
With several indicators of positive growth, the company updated its revenue guidance for the full year 2022 to be in the range of $150m to $160m, compared to previous estimates of $140m to $150m.
Commenting on the impact inflation is having on the business, Freeman said, "Although inflation continues to be a headwind, we have good visibility into our cost structure, and have greater conviction in our productivity agenda, which is underpinning our confidence in updated guidance."
Addressing increased household demand
"As you can see from our first quarter results and guidance, our growth continues to be strong, but we're not satisfied. Keeping up with demand for our brand has been one of our biggest challenges," said Freeman.
Household penetration of the Real Good Food brand increased from by 7.4% in March 2022 to 8.3% in April 2022, according to Numerator.
"This is approximately one in every 12 US households has our product. In fact, our household penetration now ranks number two amongst all health and wellness frozen brands, behind only Amy's, which is over a $500 million brand at retail," said Freeman.
Unlike Amy's, Real Good Food has reached its key milestones much faster since its founding in 2017, claimed Freeman.
"To be at these levels of household penetration, speaks to how our brand position resonates with a broad consumer base within a large total addressable market," he said, adding that the brand's repeat rates are in line with the rest of the category at 33%.
Velocities are also exceeding original expectations, growing at 68% year-over year over the 12-week period ending March 20, 2022. Growth in velocities was primarily driven by baseline velocity growth and growth in core items and broad-based pricing actions, added Freeman.
"These strong brand health indicators underpin our confidence in achieving over $500 million in sales," he said.
Social media strength
The brand has also made a splash on social media where its impressions, engagement, and number of followers have exceeded all frozen food brands owned category giants including Conagra and Nestle combined, according to Freeman.
Rather than traditional advertising, Real Good Food has taken the social media route where it is building a loyal and engaged community through "peer-to-peer conversations" through several social media platforms where the average number of comments per post exceed that of the top seven health and wellness brands in the frozen food category, Freeman noted.
So, why does this matter? It matters because this unique capability enables us to drive new users to the categories we participate in, and also efficiently feed demand for new products before they come on shelf. This leads to greater household penetration and incremental category growth for our retailer partners," he said.
In terms of products, the company is taking a "fewer, bigger, better, and faster" approach focused on more specific subsets of the frozen food category.
"For 2022, we're focused on breaded poultry, Asian multi-serve entrées, and expanding our breakfast platform. These categories are all ripe to be disrupted by our brand promise, because there's very little to no healthy nutrient-dense options on the market today that are credible," said Freeman.
"This is meaningful innovation that will extend our brand in massive, high-velocity categories, representing approximately $5 billion in retail sales on aggregate."
A key piece to Real Good Food's long-term growth targets lies in its Bolingbrook facility, which is two times the size of the company's existing facility and will have the capacity to produce between $250m and $300m in sales at full capacity, according to the company.
"Bolingbrook enables our entry into these categories and gives us much needed capacity to meet the growing demand for existing products," added Freeman.
"With all this exciting activity, we believe we are in the very early innings of growth and well positioned to capture market share in frozen categories in which we compete."