Vital Farms: a humane approach can bring excellent profits
Vital Farms sells chicken eggs for much more than its competitors, but buyers are happy to overpay. The fact is that the company professes a humane approach to animals: chickens graze freely in the open air, and every two weeks they are transferred to a new site.
Any farmer can become a supplier of Vital Farms, it is enough to follow a number of strict rules that guarantee a comfortable life for laying hens. The extra effort pays off with a vengeance: by raising 75% fewer chickens, enthusiasts can earn 25% more money. Under the brand of the company, oil is also sold from farms where cows are provided with decent maintenance. At the moment, more than 200 small farmers cooperate with Vital Farms.
In 2020, retail sales increased by 53%. In the fourth quarter of 2020, revenue and gross profit increased by 30% and 80% yoy, respectively. Good profit figures were achieved thanks to a reduction in the amount of material costs for the production of eggs and milk. Vital Farms is starting to benefit from economies of scale: net income and adjusted EBITDA showed growth of 168% and 161% YoY, respectively.
The potential for further growth remains: Americans like to support ethical producers, and were also able to appreciate the positive effect on taste, which is affected by more comfortable keeping of animals. At the moment, such farms account for only 10% of the market for chicken eggs, and Vital Farms expects to radically change the situation. In August 2020, the company began to develop the fast food market (Vital Bites) - management continues to diversify the business.