August 29, 2022
Real Good Foods (Tii:RGF) Executive Chairman Bryan Freeman has a simple philosophy about the food his company produces: Take the comfort food people love and make it more nutritious. Real Good Foods has separated itself from its competitors in the frozen food industry by taking food we all love like enchiladas, breakfast sandwiches and stuffed chicken and made it low in carbohydrates, high in protein, and made from gluten and grain free real ingredients.
The company’s mission has resonated with both retailers and consumers. Founded in 2016, the company now offers options across breakfast, lunch, dinner, and snacking available in more than 16,000 stores nationwide, including Walmart, Costco, Kroger, and Target, and directly from its website at www.realgoodfoods.com.
TiiCKER sat down with Freeman, a food industry entrepreneur who joined the company a year after it was founded. Here’s what he had to say:
TiiCKER: Not long ago, the frozen food aisle was filled with unhealthy options – fat-filled and highly processed food. How is Real Good Foods changing the frozen food category?
FREEMAN: Frozen food, in general, is a huge, huge category with $58 billion in revenue. And to your point, just 11% of that is better-for-you-marketed products whereas the rest of the store averages around 23%. Real Good Foods is part of that better-for-you segment of frozen food. That part of the category is growing over 6% CAGR (compound annual growth rate). What makes us different from the other products that are available today is our brand promise, which is the absence of sugar, low carbohydrates, high in protein, and clean ingredients. And what was really interesting and what got us excited about our business is when you walk the frozen food aisle, to your point, there are very few products that are low in carbohydrates and high in protein.
Even the ones that position themselves as being better for you, at the end of the day, the more you eat them, the more you're likely to put on weight and potentially become obese, which leads to several health issues. A big part of our population is afflicted with diabetes. In fact, one third of our population is either pre-diabetic or unfortunately have the disease and there's really nothing for them in the frozen food aisle. That's the problem Real Good Foods is solving for. I think that’s why our growth has been so meaningful. This business has grown by 2x just in the last year. And we continue to see acceleration in our velocities going forward.
TiiCKER: How long has the company been in business?
FREEMAN: The company was founded in 2016 and that year I think the business did maybe $500,000 in direct-to-consumer sales. This year – and we just updated our full 2022 guidance – we guided to $155 million to $160 million and that's in branded revenue. We think that these are still very early innings. Our view, our mission really, is to grow this business to at least $500 million in revenue. The reason we have such a strong conviction that we'll be able to do that is first, our total addressable market, but second, the brand resonates with a broad consumer base. We have the second highest household penetration of any better-for-you frozen food item in the country (second only to Amy's Kitchen, which has about $500 million in sales). For us to only be a little more than five years on our journey and to have one in 12 households with our product, we think that we have a good opportunity to significantly grow this business in the coming years.
TiiCKER: Did you found the business Brian?
FREEMAN: I did not. The business was founded back in 2016 and I came on board in 2017 after the business that I was with (AdvancePierre Foods) was sold to Tyson Foods (Tii:TSN). I brought several folks with me from that company. We took (AdvancePierre) public and achieved a market cap of $2.2 billion, and then we sold it to Tyson 15 months later for $4.2 billion.
TiiCKER: Real Good Foods has an impressive social media presence. It seems as if you are not just attracting customers, but also fans. Why is that so important to personally connect with your customers?
FREEMAN: You know, I think brands are being built differently today. The idea that you're going to go spend a bunch of money on cable advertising and think you're going to be successful, that's obsolete. All of us are able to opt out of intrusive traditional advertising and so Real Good Foods’ secret sauce is our social media capability. We have the largest social media following in all of frozen food today. In fact, our community is larger than all Nestle or Conagra frozen brands combined. It is not only important to us, but also to retailers. The reason why retailers continue to give us opportunities to expand our offerings in their stores is because we're able to drive users that don't typically buy frozen food over to those categories.
I'd welcome you and your audience to go check us out on Instagram. We have 430,000 followers and engagement levels are very high. Then go look at another food brand and compare. Of course, we're on TikTok and we're on all the various platforms. We recently went old school and just a few months ago started a VIP Facebook page and immediately there are over 11,000 followers. If you go on that site and look at the enthusiasm that our community has for the brand, it's remarkable. It is foundational to our business. It drives our innovation, it drives our company and our mission, and that ultimately results in better products that resonate with our community.
TiiCKER: Do you have any plans to expand into different categories or do you intend to stick to the low-carb, low-sugar, high-protein market?
FREEMAN: You know, they'll never come a time where anyone raises their hand and says, “I want more sugar in my diet.” That's never going to happen. 57% of all adults try to reduce their carbohydrate intake. People now understand that carbohydrates convert to sugar and our job is to make your favorite food taste just as good – if not better than your favorite food – without the carbohydrates and sugar. So, as an example, our enchiladas are a wild success. What we did is took the typical flour tortilla out. We made a tortilla out of chicken (the tortilla is literally made from a chicken parmesan tortilla instead of the highly processed flours found in other frozen enchiladas) and when you eat the product, it smells the same and it tastes just delicious. It's craveable. We’re not about making weird food. We're about asking our customers, “Hey, what do you like to eat that might not be too good for you?” It's our job to figure it out. And so long as we execute against that, I really think that this business has a long way to go.
TiiCKER: Where do you see the company in five to 10 years. Where do you see the future of Real Good Foods?
FREEMAN: I see at least $300 million in revenue during that time period. I go back to our current distribution, and it is still very early days. We have approximately 150,000 points of distribution. Amy's Foods has seven to 10 times that number. So our job is to make our products available everywhere. There are plenty of opportunities. We just now began shipping to Mexico. We think there are opportunities in Asia and Canada as well. There's demand for our products outside of the U.S. due to our social media footprint.
What impresses me about this last quarter is that our velocities are accelerating, along with our household penetration. So for those two reasons, I believe that we're still in the very early innings of our growth story. The other thing is we brought forward is our plan to become EBITDA positive. And we committed to adjusted EBITDA positive in the fourth quarter and EBITDA positive next year. I think we can grow at the rate we are and be profitable. I think with Real Good Foods you have a very valuable business going forward.
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