July 14, 2020

Vital Farms challenges incumbent food model in IPO registration statement

Austin, Texas-based Vital Farms, Inc. ("Vital Farms"), which offers a range of ethically produced pasture-raised foods in the United States, announced July 9 that it has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission relating to the proposed initial public offering of its common stock.

With annual sales of US$140.7 million and profits of US$2.4 million in its most recent fiscal year, the company described itself in its registration statement as, "an ethical food company that is disrupting the U.S. food system. We have developed a framework that challenges the norms of the incumbent food model and allows us to bring high-quality products from our network of small family farms to a national audience."

A report from the Progressive Grocer said that the framework has enabled the company to become the leading US brand of pasture-raised eggs and butter and the second largest US egg brand by retail dollar sales. The company defines 'pasture-raised'as products from animals that were raised for at least some partof their lives on pasture or with access to a pasture, not continually confined indoors. These pasture-raised eggs accounted for about 90% of net revenue during the company's most recent fiscal year.

"Our ethics are exemplified by our focus on the humane treatment of farm animals and sustainable farming practices. We believe these standards produce happy hens with varied diets, which produce better eggs," Vital Farm's registration statement said. "There is a seismic shift in consumer demand for ethically produced, natural, traceable, clean-label, great-tasting and nutritious foods. Supported by a steadfast adherence to the values on which we were founded, we have designed our brand and products to appeal to this consumer movement."

The company currently offers 20 products and sources its eggs from about200 family farms. The eggs are processed at a single 82,000-square-feet (~7,620-square-metre) facility in its hometown of Springfield. The facility has a capacity of three million eggs per day.

Among the risk factors cited were the company's dependence on the single processing facility, and sales concentrated among just a few distributors such as United Natural Foods, KeHE and US Foods.