Freedom Foods looks to Oatly’s $US10bn IPO to revive fortunes

Freedom Foods believes there is “tremendous upside” from Oatly’s $US10bn IPO in resurrecting its own share price.

Joel Selwood of the Cats celebrates their win during the 2021 AFL Round 13 match . Picture: Getty Images

Sport analogies are often cliches businesses adopt when seeking to emerge, like a phoenix, from the ashes of a scandal. But for Freedom Foods it is a reality.

Top four AFL club Geelong Cats sealed victory over Port Adelaide on Thursday night, despite a last quarter surge from the Power.

And the Cats, which are again a serious contender for a grand final berth, had little known weapon in their arsenal — Vital Strength protein power, which is one of Freedom Foods’ many brands.

Freedom has previously been criticised for the amount of brands in its portfolio — with disgraced former chief executive Rory Macleod launching 130 products within a year — making it difficult to manage inventory and creating confusion about what the company actually produces.

But its new chief executive Michael Perich is determined to sharpen Freedom’s focus, with it playing to its strengths in the plant-based protein, dairy and whey supplement categories.

It is hoped this strategy will resuscitate the company’s share price, which has plummeted from a high of $4.35 last September to 41c, with investors battling a prolonged and torturous ordeal after it shocked the market in June, revealing a near $600m black hole in its accounts.

The accounting scandal led to the departures of Mr Macleod and the company’s chief financial officer, as well as the company selling its core cereal and snacks business to Arnotts.

This has left Freedom with its UHT plant-based and full dairy milk products and health supplements business, and what it believes is an opportunity.

Swedish vegan milk brand Oatly listed on the Nasdaq last month, raising $US1.43bn ($1.84bn) to value the company at $US10bn. While this pales in comparison to Freedom’s market capitalisation of $109.5m, it highlights a trend that Mr Perich believes the company is well positioned to capitalise on.

Freedom owns leading specialty milk brand, MilkLab, which has won over baristas with its range of dairy and plant-based milks, including oat, almond, coconut, macadamia among others. If Oatly can achieve a valuation of $US10bn, just producing oat milk, then Freedom believes MilkLab — which offers baristas a complete solution to providing alternative milks — can win back investors and achieve a similar result.

“There is tremendous upside. And for us, our oat and almond beverages is an Australian sourced product, it’s produced locally, it’s important that we have that sustainability,” Mr Perich said.

“That’s why we believe that we can leverage off the strength of the MilkLab brand and the valuation is there to be seized. We definitely see an opportunity out there, delivering the right products to our customers and that (valuation) will get reflected over a period of time.

“We have been through plenty of things at Freedom and we’ve turned that around and we are really getting focused on our branding.”

It may seem tenuous linking the company to Oatly. After all, many companies attempt to piggyback on the success of others. Just look at A2 Milk, which sparked a series of copycats, only to face a collapse in its market cap — which dived from being twice as big as Qantas at $13bn to $4.09bn after the Chinese daigou trade evaporated.

But Freedom has achieved a strong endorsement from the Geelong Cats — not an easy feat in the highly competitive AFL market.

The Cats began using Freedom’s Vital Strength protein powder PUREnWPI at the start of the 2020 season and are now starting to adopt other Freedom-owned supplements.

“What we love about Vital Strength is that it is a local company with all the protein powder produced out of Shepparton, so we know where the product is coming from,” said Dom Condo, consulting sports dietitian to the Geelong Football Club.

“The protein they use is a really high quality protein, all from native Australian whey, which is really important. It also has a high quality of leucine and leucine stimulates muscle protein synthesis and health and recovery.

“The difference between a lot of protein powders on the market is what they are made from and a lot have ingredients with no benefit, they just sort of contribute to the weight and bulk of the product,” Dr Condo said.