Candy Club serves up IPO opportunity in US$36 billion confectionery market

Candy Club IPO ASX confectionery market
The US confectionary market in 2017 generated US$35 billion in sales.

Confectionery start-up Candy Club is offering Australian investors “a mouth-watering opportunity” through its IPO, with the ASX debut scheduled for early January.

Los-Angeles based Candy Club distributes and sells a wide range of “premium specialty candies” aimed at the more sophisticated upper-end of the US confectionery market.

Via its IPO, Candy Club plans to expand its business by raising a minimum of $4.5 million at $0.20 per share and is expected to have a market cap of around $30 million after listing.

High-profile backing

Candy Club has several high-profile backers including the likes of Young Rich Lister Adam Schwab; James Baillieu, member of the infamous Baillieu dynasty that wields a vast multi-million-dollar property portfolio across Australia and with one of its patriarchs, Ted Baillieu, becoming Victorian premier in 2010.

To really push its business forward, Candy Club has set about pursuing what it calls an “omni-channel” business model where it offers its confectionery directly to consumers in shops, online, but also, via business-to-business (B2B) deals enabling products to be sold by other shops, hotels and entertainment venues.

Candy Club home page
The Candy Club home page: www.candyclub.com

Candy Club operates a leading direct-to-consumer candy “subscription service”, which it says generates repeat customers and growing brand loyalty.

Candy Club sell its products through physical vendors and high-street stores but also generates sales via an e-commerce-powered subscription platform with repeat sales and long-term customers.

Sweet performance to date

Some of its performance metrics have most certainly been impressive – hitting record highs over the past year.

A core assumption made by Candy Club is that a large segment of its addressable audience (as well as on a broader basis among consumers in general) is currently moving from “mass-market to specialty”

The other is that the same guiding principles exist that see confectionary sit at the checkout of 7/11 and supermarket. One of the prime factors generating strong market traction is a huge addressable audience with a “97% household penetration” according to the National Confectioners Association 2017 annual report. The confectionery start-up is simultaneously targeting premium market share and customers that are willing to pay for “quality over quantity”.

Candy Club revenue gross profit margin 2018

According to its most recent figures, Candy Club has seen its average order value reaching US$48 and average annual spend hitting US$288 per customer in the past quarter. Its gross profit margin sits at a healthy 50-60%, having grown from 32% in 2015 to 55% last year.

In terms of raw figures, the company has seen its combined gross profit and revenue rise from US$2.8 million (A$3.8 million) in 2015 to US$8.5 million (A$11.5 million) in 2017.

With the B2B, gifting and scaling of B2C operations anticipated to grow this figure further in future.

Candy Club wants to continue moving up by using the $8 million IPO funds to expand its operations and make further inroads into a confectionery market that’s worth around US$36 billion (A$49 billion) in the US.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.