Keytone Dairy locks in frozen foods distribution deal with Woolworths

Keytone Dairy ASX KTD super cubes SuperFood Puree frozen Woolworths
Woolworths will stock Keytone's full SuperFood frozen purees range across Australia in 960 supermarkets.

New Zealand-founded Keytone Dairy Corporation (ASX: KTD) has confirmed a newly-developed line of SuperFoods frozen purees will be stocked in more than 960 large-format retail stores owned by Woolworths Group (ASX: WOW).

Woolworths has confirmed an initial three flavours of SuperFoods purees – mixed berry, mango and banana – will be stocked in large format stores nationally from April with additional products introduced before year end.

Under the terms of the deal, Keytone is required to meet a minimum sales order level of approximately $2.5 million over 12 months for the initial three flavours.

Super Cubes acquisition

The proprietary product range has been developed under the Super Cubes wellness brand following Keytone’s $726,000 acquisition of 40Forty Foods Pty Ltd (trading as Super Cubes) in October.

Super Cubes’s flagship product range of frozen cubes of fruits, vegetables, plant-based proteins has an existing distribution network across Woolworths and 400 independent supermarkets, as well as an increasing online presence.

SuperFoods frozen purees are targeted at “health-conscious, time-poor consumers seeking healthy snack options”, and are hoped to have universal appeal across age groups and categories.

National ranging

Keytone said national distribution validates Super Cubes’ health credentials and demand in market.

The company will use the Woolworths deal to gauge the product’s success prior to locking in export agreements with international markets, including South East Asia where health and wellness are becoming big business.

Chief executive officer Danny Rotman said the roll-out of Super Cubes products and securing national ranging with Woolworths represents “exciting opportunities” for Keytone.

“As we continue to gain momentum as a leading product developer and brand owner, we are gaining greater traction in the market, working closely with strategic retail partners and leveraging our in-house expertise and national distribution,” he said.

Fast-tracking development

Keytone’s acquisition of 40Forty Foods and the Super Cubes brand “substantially fast-tracked” the company’s goal of developing its own high-value, high-margin proprietary product suite.

Key to the deal was the brand’s established health and wellness profile and existing channels to market including major and independent grocery stores, its own retail website, and distribution through the Global by Nature online shopping site.

In the 2019 financial year – also Super Cubes’ first full 12 months of trading – the business realised sales of approximately $650,000, with significant distribution and sales only achieved in the last quarter of that year.

“Super Cubes is an exciting and fast-growing brand which continues to exceed expectations,” Mr Rotman said at the time.

“We are well placed to leverage our expertise and capitalise on an early mover advantage into South East Asia’s health and wellness sector with this strong proprietary brand.”

Nutritional powder facility

Last month, Keytone announced it had completed the integration of its Melbourne-based nutritional powder manufacturing sites into one large-scale facility ahead of schedule.

The company’s Australian operations now include eight accredited hygiene packing rooms including a dairy-free and gluten-free room, and a new product development laboratory.

The production facility also houses highly-automated plant and equipment, a dedicated multi-room blending and warehousing area and Australia’s first PET bottling UHT plant.

The facilities will be used to scale Keytone’s existing proprietary brands into core markets including China, as well as significantly grow the business to existing and new third-party clients.

Keytone said licencing and accreditations had been received from Dairy Food Safety Victoria and CNCA (Certification and Accreditation Administration of the People’s Republic of China), allowing it to manufacture and export nutritional powder products.

Integration of the manufacturing facilities commenced after the $18 million acquisition of dry powder and ready to drink dairy-based producer Omniblend in July which had its own facilities in the same area, enabling Keytone to achieve “operational synergies”.

At midday, shares in Keytone were trading 2.53% higher at $0.405.