Yani Dragov: We want Smart Organic to raise BGN 3m from the Bulgarian Stock Exchange (20.05.2015)
Our aim is to expand production lines and export to the US.
What are the objectives of the company Smart Organic, who announced the company is preparing to do an IPO and how are the Roobar snacks doing around the world – comments in an interview for Investor.bg Yani Dragov, majority shareholder of the company.
Yani Dragov has studied in the Technical University in Munich and later on in LMU in the same city. He has worked as a portfolio manager in TBI Asset Management. He founded the company for distribution of organic products Smart Organic AD.
- Mr. Dragov, several days ago, you announced that you are expecting to do an IPO of Smart Ogranic on the Bulgarian Stock Exchange. When should we expect that to happen?
Last week we submitted the prospectus for the initial public offering (IPO), the question now is how long the Financial Supervisory Commission will take to approve it. I hope this will happen in early June so that we can do the offering then or no later than the first half of June. If the prospectus is approved later, we will postpone the offering until September, as the summer season is not appropriate for an IPO.
- Why did you choose to do an IPO?
The main reason is the risk. Like every other production company, we use credit lines for working capital. However, if a problem occurs, equity financing would allow us to find a way to optimize our operations and the company can survive without the pressure of monthly credit payments.
The other reasons are the advantages a public company has with regards to transparency. The third reason is the popularity we can get. Furthermore, we can give our employees company shares and thus incentivize and motivate them even more.
- What amount will you try to attract and what would you use it for?
We will try to attract roughly EUR 3m in order to finance our production lines, machines procurement and entry into new markets. It will cost us a lot more, especially to enter the US. We also plan to set up a distributor company in Germany.
- What is the minimum capital required in order to mark the offering as successful?
The minimum is 11% of the current company capital.
- Your products sell in 40 countries, which is your main market?
We sell products in all European Union countries including Switzerland, Norway, Serbia and Montenegro. We also sell products in UAE, Lebanon, Australia, US, Canada and Russia.
Our largest market presence is in Germany, where almost all of our export goes. The German bio market is the most developed one is Europe. It is almost twice as big as the second one – France, which is twice as large as Great Britain. This is the reason why we want to further focus on Germany.
- What production volume did you achieve there?
Last year, our cumulative export was a bit less than BGN 5m. Germany – BGN 1m. We do not only sell the Roobar, Smart Organic is the largest distributor of bio foods. Apart from that, we also have a franchise of ZelenBio and we pack bio foods under our brand such as “BioClass” and “DragonSuperfoods”.
- What are the company financials for 2014?
I firstly have to clarify that Smart Organic distributes Roobar in Europe and the Middle East while in the other markets such as the US, Canada and Australia the bars sell directly through RooBrands.
Smart Organic earned BGN 8.5m in revenue compared to BGN 4m for 2013. Profit after tax was BGN 1.4m compared to BGN 0.7m for 2013. Roobrands earned BGN 3.5m in revenue compared to BGN 1m for previous year. Net income for 2014 was BGN 1.2m against BGN 0.4m in 2013.
Smart Organic acquired 52% stake in Roobrands at the end of 2014. When we clear up the transactions between the two companies, the consolidated data of the two companies shows BGN 8.9m in profit after tax for 2014 compared to BGN 4.2m in 2013.
- What is your forecast for this year?
We are expecting between 60% and 80% growth this year. We achieved 68% growth for the first quarter of 2015 compared to 2014.
- While still on the Roobar topic, you say that one of the advantages of your bars is that it has 4 ingredients while your competitors have 10-15 ingredients. Why the smaller number of ingredients is considered an advantage?
Our customers aim to eat healthy and naturally. You can see and taste the ingredients of our bars. This simplifies the digestion. They are extremely pure – no artificial sweeteners are added. Each and every one of our bars has at least 1 superfood in it – goji berry, maca etc. Every ingredient is the same as the one you can find in nature.
Our competitors’ bars are extremely fabricated and not very healthy, as they contain high doses of fructose syrups or as many as 10-15 ingredients. When the ingredients are many, the risk of eating something the customers don't want to eat increases.
There are other producers of bars from raw products but they are few. We have an attractive design and the products are very delicious.
- Why have you focused on the American market and what are the advantages there?
The US market is huge, bigger than the European. The bars as a product category were invented there and the competition is highly developed. There are hundreds of brands.
In September last year we attended a foods exhibition in Baltimore where 120 different bars from various brands where presented. Many of them were not in our sub category but the diversity is huge – there are beef bars as well. We also saw products with an insect protein which is the latest trend. But we are a vegan company so we do not produce such products.
Even though there were hundreds of participants, our product stood out and we ranked second in the best bio product category. Roobar was marked by people who have never seen it before, but were amazed by it despite the competition. This was our first attendance at such an event in the US.
- What are your sales in Bulgaria?
Things are going quite well, even though Bulgaria was never our focus as the product was designed for Western Europe. Nevertheless, people appreciate the fact that the product is Bulgarian and they like it. We sell through all available outlets – supermarkets, bio stores, gas stations, gyms, vending machines and the XoPeKa channel.
- Are some of the ingredients grown in Bulgaria?
Yes, the almonds and rosehips are Bulgarian, but many of our products cannot be grown in Bulgaria.
- What is your end goal?
We want Roobar to become a globally recognized brand.
- Do you advertise and how?
No, we only use social media. Many bloggers write about our product because they like it. We do not pay them for that.
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