By Gary Stern
In 2023 grocery prices rose 5.8% in the U.S. from the previous year. With this increase, consumers are looking to cut costs at the supermarket cash register. This is all good news for Mama’s Creations (NASDAQ: MAMA), which makes prepared foods from spaghetti and meatballs to salads for grocery store salad bars and meals to go.
Mama’s Creations has a market cap of $165 million and its stock closed Feb. 23 at $4.81. Its 52-week high was $6 and it once dipped to $1.6.
Revenue was $99.3 million in the fiscal year ending Oct. 31. Can it boost that number?
In November 2023 the company introduced an e-commerce site to sell its prepared foods directly to consumers. It supported that venture with digital advertising and targeted social media initiatives.
At its last quarterly earnings report issued Oct. 31, revenue rose that quarter to $28.6 million from $25.6 million the previous year.
Lucas Zimmerman, a managing director at Mama’s Creations, which is based in East Rutherford, N.J., sees rising grocery prices as a golden opportunity for it to raise its revenue.
“As consumers eat out less, they are ‘trading down’ to grab-and-go prepared foods,” he says. Moreover, so many people in the U.S. are working long days and overextended hours that “nobody has six hours to braise meatballs at home, but people still want to eat good food.”
Most of the company’s products are available for about $10 a meal for one person. Mama’s Creations attracts a wide-ranging clientele, though middle-age females seem to dominate as their target audience. Offerings include sushi, pizza, salads, proteins, sandwiches and soups – something for nearly everyone.
Zimmerman adds that Mama’s Creations reaches a wide swath of Americans from the working poor to middle-class and up since its products are sold in-house at Costco, Publix, BJ’s, Whole Food, Aldi and Sam’s Club as well as many smaller regional chains.
Even though grocery prices increased in 2023, Zimmerman pointed out that restaurant prices rose at a higher rate than supermarket prices, making take-out meals more cost-effective.
Mama’s Creations was originally named Mama’s Mancini but changed in August 2023 to appeal to a wider audience, and not be viewed as a mostly Italian brand. After the name change, the company broadened its menu items and introduced General Tso’s chicken, vegetarian Chana Masala, beef fajitas and Korean-inspired meatballs.
Zimmerman acknowledged that the new e-commerce site currently contributes “a small part” of the company’s revenue and is viewed primarily as a “test-lab to beta-test new product ideas before a national launch.”
How optimistic is Zimmerman on the likelihood that Mama’s Creations can boost its revenue in 2024?
“The deli is a fast and growing segment of the grocery store which aligns with consumer trends and shopping habits, with grocers concurrently seeking to grow their grab-n-go prepared food offerings,” he said.
Howard Halpern, the research analyst at Taglich Brothers, based in Cold Spring Harbor, NY, was positive about growth at Mama’s Creations in his Dec. 15 report. He saw “substantial growth potential for its authentic Italian products,” and was also positive about the new platform selling products and new, more diverse offerings. He also noted that the company expanded its sales team from one to five, which should help jumpstart revenue.
Halpern noted in his report that the company’s products appeal to “health-conscious consumers who seek to avoid artificial flavors, synthetic colors and preservatives that are used in many conventional packaged foods.” He referred positively to its acquisitions in December 2021 of T&L Creative Salads and Olive Branch, which added grilled and breaded chicken breasts, chicken strips and kosher salads to the product offerings.
Despite its products being sold at Publix, Stop & Shop and Sam’s Club, Halpern noted that “other supermarkets still have significant growth opportunities in terms of location expansion.” Areas of growth include fresh prepared meals, hot bars, cold bars in deli and sandwich sections of deli departments.
Halpern noted that growth of supermarket sales for prepared meals should increase by 8% to 10% annually.
Another research firm, Kairos Research, noted that Mama’s Creations “aims to be the one-stop shop solution for deli isles nationwide, while also continuing to sell pre-packaged retail items.” Their goal is to “expand their deli offerings and selling their existing products.” Kairos concluded that “their value proposition is fairly simple; they want to become the healthy, authentic and convenient one-stop solution for the deli isle and they believe they can capitalize on some changing consumer trends.”
Halpern concluded that growth at Mama’s Creations was contingent upon “quarterly net sales growth, expense leverage, as well as maintaining quarterly profitability that began in third quarter 2023.”
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