4) Continue building our ancillary businesses such as our international distribution and Office Coffee Service (OCS) program locally.
In Fiscal 2014 Q4 and Fiscal 2015 Q1, we established an annual promotional calendar for our retailers and distributors. Promotions range from discounts at store level to in-store tastings. To date, promotions and trial programs, especially at some of our larger accounts such as Kroger, Safeway and HEB, are increasing product velocity.
Additionally we are constantly evaluating cost effective tools to generate brand awareness and trials outside of the retail environment. We will continue driving these efforts with the goal of seeing revenues from organic growth increase quarter-to-quarter after Fiscal 2015 Q1.
Our relationship with Mother Parkers provides us an infrastructure for fast growth on many fronts.
Mother Parkers is the largest independently held roaster in North America. A company of their size and history of success and innovation can make a huge difference for us, and help increase sales before we consider looking for additional financing.
We’ve highlighted the terms of the transaction with Mother Parkers in the past, but for the upcoming year, investors should know the following:
It gives us a cash infusion that will allow the company to continue our projected growth. Cash flow no longer becomes an issue; rather we believe with this cash infusion that we have the ability to capitalize and grow quickly.
It enables us to continue to focus on selling and marketing instead of worrying about logistics.
Marley Coffee will be the Mother Parkers’ premiere brand as they take us to market. This commitment comes with a large marketing budget that will be impactful for both the US and Canadian markets.
The deal also helps improve our margins as we have the buying power of a much larger company like Mother Parkers and the renewed transaction with them will improve our economics.
Canadian sales, where Mother Parkers is headquartered, are expected to deliver significant revenues via a licensing agreement, as we will have distribution in all the major retailers via Mother Parkers. Within the next few months we will be deployed in ~ 2,000 retail locations throughout Canada to places like Loblaw’s, ECS Coffee, Sobey’s, Metro, IGA, London Drugs, and Best Buy/ Future Shop.
It aligns with our mission and creates key innovations for the upcoming year such as eco-cup, a differentiator that we believe will drive sales.
We are excited about our other business lines as well. Our away from home business has been growing, especially in the Denver area. Its growth helps feed our grocery retail business at a minor cost.
Our international growth is picking up pace as well. Europe is growing, as has our commitment to foster the region. Chile and South America still remain one of the most exciting markets for us as our distributors and partners in that region have done a phenomenal job marketing and growing the brand.
Our Chilean distributors just ordered their first full container of coffee and their goal is to buy a container per month, which would make them a $600,000-per-year account.
Numbers
Sales revenues for the years ended January 31, 2014 and 2013 were $6 million and $1.8 million, respectively, an increase of $4.2 million or 234% from year-to-year.
We do not expect to grow at the same rate in the upcoming year; however, our goal for Fiscal 2015 is to break $10 million in revenues. We believe this major objective can be met by fulfilling our current authorization in 10,000 retail locations and increasing our velocity through effective marketing programs.
We are confident in meeting this objective by maintaining that number of storefronts, increasing our items per store by 15% and our velocity to half a case per store per item per week, all goals we believe we can achieve, we estimate we can obtain a run rate of $25 million with our existing distribution.
Gross profit as a percentage of gross sales was approximately 10% for the year ended January 31, 2014 compared to 21% for the year ended January 31, 2013. Gross margins were very tight in Fiscal 2014 as significant discounts and deductions were given to gain distribution and market penetration. As these accounts mature, we expect our gross margins to return to 20% or above in Q2 of this year.
