4 key elements of Vital Farms’ growth strategy

Coming off a strong financial quarter and with a major infusion of capital from an initial public offering (IPO), Vital Farms is ready to grow.

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(Vital Farms)
(Vital Farms)

Coming off a strong financial quarter and with a major infusion of capital from an initial public offering (IPO), Vital Farms is ready to grow.

The pasture-raised egg producer was near the bottom of the Egg Industry Top Companies rankings with a flock of 300,000 laying hens at the conclusion of 2019, but as the company grows, it could be a different story in coming years.

Vital Farms completed an initial public offering (IPO) in August, raising almost $205 million.

In its most recent quarter, which concluded June 28, Vital Farms reported strong financial results, highlighted by a more than doubling of its net income year-over-year.

During the company’s first quarterly earnings call as a publicly-traded company, Vital Farms President and CEO Russell Diez-Canseco gave an overview of the quarter’s financial results, but he also outlined what he called four key elements of the company’s growth strategy. Those are:

1. Household penetration

Diez-Canseco said the company’s household penetration was on the rise during the second quarter, and the company aims to work to continue that pattern of growth.

The company’s CEO attributes some of those recent gains to increased eating at home because of the COVID-19 pandemic, but he believes it is also partially due to consumers trying Vital Farms products and developing a loyalty to them.

“We do see some early signs that consumers who are trying our products for the first time are making repeat purchases,” Diez-Canseco said.

2. Growth in the retail channel

Diez-Canseco said Vital Farms is continuing to be effective in engaging with existing and new retail partners.

“During the second quarter, Vital Farms’ store count increased. For example, during the COVID stock-up period, the eight weeks ending April 19, approximately 450,000 new buying households purchased Vital Farms eggs. In the following eight-week period ending June 14, 20% have already become repeat purchasers and 45% of those purchased Vital Farms eggs multiple times during those eight weeks.”

3. Expansion in the foodservice channel

Diez-Canseco said the recent decline in people eating away from home has limited Vital Farms’ ability to reach a broad number of customers in the foodservice channel. But with more people eating out again, the potential for growth in that sector are there.

“We see growth opportunities if foodservice … This remains a small segment of our business, and we look forward to bringing additional focus to it as the sector rebounds,” he said.

4. Extending product offerings

The company is extending its reach through the innovation and development of new egg products. Diez-Canseco mentioned Egg Bites as an example.

“Our focus in quarter two was on the successful ramp up of production of our new Egg Bites, which we launched in August. Egg Bites are a new line of single serve, refrigerated bites made with high quality ingredients, including Vital Farms pasture-raised liquid whole eggs, pasture-raised cheese, humanely raised meats and vegetables,” he said.

“Consumers are staying at home more than usual right now. And for many, their days are busier than ever. We created Egg Bites to address the growing number of consumers who crave a protein-packed breakfast made with fresh ingredients, but who don't always have the time to cook. As our first multi-ingredient product, this launch has given us valuable experience in the entire innovation process from ideation to procurement, to co-manufacturer management. Our successful launch involved many crew members from across the company and we thank them for their tireless efforts to bring this product to market.”

Vital Farms was founded in 2007 and is headquartered in Austin, Texas.

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