Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Investing Strategy: The Chill Brands Edit
Part 8
The buyout question
Sommerton has reportedly already been in contact with some of the major tobacco brands, and a buyout at a larger valuation is likely the long-term business strategy. What valuation? That’s a question that cannot really be answered until more financial metrics are known; while Chill is clearly expanding exponentially (at least in the UK), it is worth considering the wider macro environment.
British American Tobacco wrote down some $31.5 billion in value of its traditional tobacco brands in the US last month, acknowledging they have no long-term future. Spending at BATS, fellow FTSE 100 tobacco stock Imperial Brands, and all the majors on ‘new categories’ including vaping is rising exponentially.
But at the coal face, the majors are struggling to get the ‘cool factor’ (the rizz) that vaping requires. It’s a lot easier to buy a promising brand once it has proven breakthrough potential. And Chill is growing every day.
RKB
Investing Strategy: The Chill Brands Edit
Part 7
Let’s consider the reasons behind future possible legislation concerning disposable vapes: harm to the environment, harm to children, and harm to the general population who may start vaping and who would never have smoked.
Chill is doing its level best on the environmental front, and is refusing to advertise or market to children (even taking steps to help enforce this at the retail level). And while there will be some adults who start vaping Chill’s zero nicotine products, this health damage is arguably hugely outweighed by smokers or vapers switching to a nicotine-free alternative.
If legislation comes, Chill may find itself already outside of its scope. In particular, a ban on disposable vapes may only be those containing nicotine — or vapes which are non-recyclable. This would actually have a hugely positive impact on Chill as its competitors would get removed from the shelves. And in the worst possible scenario where Chill Zero vapes fell under the scope of the ban, the company has alternatives ready to go which competitors do not have.
And for investors sceptical that a zero nicotine vape will struggle to capture market value (nicotine being addictive after all), I encourage you to consider non-alcoholic wine and beer — one of the fastest-growing drinks categories in retail. I have no idea why anybody would want to drink non-alcoholic beer or wine, just like I have no idea why anybody would choose to vape in the first place.
But just because I’m not the target market does not mean I can’t recognise a large one is sitting out there for Chill to capture.
RKB
Investing Strategy: The Chill Brands Edit
Part 6
Legislation analysis
Chill is very aware that it operates in a space where future legislation could impact on its business model. However, much of the risk is overblown in my view, and where the risks exist, the company has taken steps to mitigate them.
Specifically, at its AGM in September, it noted that ‘that regulatory authorities are considering how to effectively balance the positive impact of vaping as a harm reduction tool with the need to protect children and the environment.’ This is a better approach than simply ignoring the regulatory risk.
On 3 January, it announced steps to ensure future product viability including participation in a large-scale recycling scheme to equip ‘hundreds of retailers’ with recycling units for disposable vapes — jointly backed by retailers, distributors, and brands. Nobody in the space wants to see a full ban.
Chill’s also ensuring compliance visits will be made to ensure that retailers are using appropriate merchandising and age verification processes — and further, has made clear its products are solely for adults — and will not launch ‘inappropriate flavours (such as confectionary)’ or vapes with ‘immature’ design elements. In other words, it will not market to children.
The business is also developing an expanded range of reusable and rechargeable products in response to ‘significant retail demand,’ though undoubtedly this is also a back-up plan in case of legislative change.
Sommerton notes that ‘as our operations expand, we are committed to adopting a responsible approach to sales of vape products. In an ever-changing industry, staying ahead means not only complying with regulations but working closely with our distributors and being led by demand in the market to future-proof our business.’
RKB
Investing Strategy: The Chill Brands Edit
Part 5
Then on 20 December (when most of us had started to switch off for Christmas), the company announced it had secured a ‘substantial initial purchase order’ for Chill Zero vapes into a ‘leading supermarket chain.’ Later announced as Morrisons (this makes sense given the supermarket’s Amazon Prime tie-up and private equity ownership), the vapes will enter shops this quarter — which would at that point have increased selling locations to 2,100 UK shops — having received gross sales and purchase orders of £1.85 million since Chill Zero’s launch at the start of August 2023.
It’s also worth noting that Jonathan Swann — 6.55% shareholder, and similarly invested in several other promising companies — had allowed Chill access to a £1 million supply chain debt financing facility, with a monthly interest rate of 2% on funds drawn with a term of one year.
Given that my ten year old could find a guaranteed 5% return on a retail savings account, this is a strong vote of investor confidence. But as the funds will be used to acquire inventory and roll out products, you could argue that Chill — like many fast growing companies — is now becoming a victim of its own success.
But no matter. On 22 December, Chill announced the sale of its vape products to ‘a prominent operator of UK petrol stations, trading under major brands including Shell, Esso and BP.’ Another ‘substantial’ purchase order, the company will see its vapes roll out into 265 forecourt convenience shops — increasing retail locations to 2,365 shops across the UK and sending combined gross sales and purchase orders to in excess of £2.1 million.
Once again, it’s worth repeating that Chill had only entered 200 independent shops in August September 2023 — and now expects its Chill Zero products to be on the shop floor at Morrisons, WHSmith travel locations, and the various petrol station forecourts in January 2024.
RKB
Investing Strategy: The Chill Brands Edit
Part 4
Then on 9 November, Chill ZERO began to be sold on Vape Local — a leading wholesale retailer with access to a network of 4,000+ retail store accounts — massively increasing the brand’s exposure.
This step was compounded on 17 November, when Chill received its first order from Flawless, the UK’s ‘largest category-specific retailer,’ which supplies 5,000 wholesale accounts and 50,000+ customers. In the words of the CEO, this ‘dominant force’ in the UK vaping industry is a another ‘vote of confidence’ in Chill’s prospects.
Then on 7 December, investors enjoyed a broader trading update, which demonstrated strong growth. To start with, expansionary work in the US had come to fruition, with Smoker Friendly (the largest dedicated smoke shop chain in the country) making an initial purchase order for 60 shops after Chill’s pilot into Colorado, Arizona, Florida and Texas.
The Smoker Friendly shops will stock Chill products within Colorado, Wyoming, Montana, North Carolina, Florida, Missouri, Arkansas, Tennessee, and Indiana. Smoker Friendly vapour category director Sean Musgrave is on record as ‘excited to work with Chill Brands and looking forward to trialling the Chill ZERO products. We are seeing demand grow with respect to nicotine-free vape products. Our customers are looking for a product that has no nicotine, yet still delivers the satisfaction of vaping, and I feel that Chill ZERO can satisfy that request.’
Further, Chill announced it had grown its UK market offering to 475 independent shops — remember this was only 200 shops three months before — and this included franchised branches of Nisa Local, Spar and Premier. The company also noted that after four months of sales data, it was observing a ‘positive trend in reorder rates from independent retailers’ with shops reordering roughly two months after their first purchase on average.
In addition, Chill Zero is now on various e-commerce sites including oceanvape.co.uk, totally-vapour.co.uk, and royalvapes.co.uk. And the Chill.com marketplace had grown to 44 external brands — with plans to engage in significant marketing through 2024 to drive traffic to the site. It’s worth noting that Googling ‘Chill’ brings the site in at the top three spot.
RKB
Investing Strategy: The Chill Brands Edit
Part 3
There’s also the brand name — Chill. Chinese tat, alongside most major brands, have very little connotations, but Chill isn’t some random word on the side of some packaging — it’s a marketable brand name.
So in summary: zero nicotine, extremely good value for customers, and well branded. So far, so good. Zero nicotine vapes will appeal to those trying to reduce the nicotine intake, as well as many who want to enjoy the social aspects or even flavour of vapes without the addictive component.
The Chill growth strategy
The following is a breakdown of everything Chill’s been up to for the past few months — and is a bit of a read. It’s probably worth starting on 9 October — when the company announced it was entering an initial 150 WHSmith travel shops with Chill Zero vapes, at high traffic locations — which benefit from 500,000 passengers a day.
Simultaneously, the company updated investors that it had secured £350,000 of orders from UK retailers since launching Chill ZERO the month before — including to 200 independent shops, facilitated through The Vaping Group and Phoenix 2 Retail. CEO Callum Sommerton described the step as a ‘significant milestone.’
Then on 12 October, Chill launched its zero-nicotine vapes on Amazon.co.uk (the world’s largest e-commerce retailer). Importantly, Amazon does not allow the sale of nicotine vapes on its site, so there is a significant competitive edge — and Sommerton plans to expand the company’s Amazon presence to other countries in time. For context, since the Amazon launch, Chill has ‘outperformed expectations and gained first page rankings for ‘key search terms including “nicotine free vape.”’
This is not easy to do.
RKB
Investing Strategy: The Chill Brands Edit
Part 2
So to basics — Chill is a FMCG (fast-moving consumer goods) company which nowadays focuses on vape products, with a large distribution network through the UK and increasingly, the US — alongside its own e-commerce site Chill.com. It’s worth noting that the Chill site involves a marketplace of third-party products, from which the company makes a commission without the inventory risk (in other words, a risk-free revenue stream, excluding site costs).
The business model is actually quite simple: the company distributes ‘highly differentiated’ tobacco alternatives and ‘wellness’ products — of which there are many, including energy gum, deodorant, and even sexual wellness products — but the key products are the nicotine-free vapes, made under the CHILL ZERO brand. These are TPD-compliant (EU safety rules for sale/manufacture of e-cigarettes and e-vapes), and also come with a high puff count.
Not a vaper? Me neither, but the puff count is essentially how long a vape lasts for; you can get 3,000 puffs for £12.99 on the Chill site — this compares to a typical ELF Vape at 600 puffs or VUSE vape at 700 puffs for £5.99 apiece. This makes Chill disposable vapes more than twice as cheap to buy compared to competitors — and this is a factor that makes a huge difference to the investment case.
RKB
The following article was written by Charles Archer and is Copywrite of Investingstrategy.co.uk www.investingstrategy.co.uk
Part 1
Chill Brands (LON: CHLL) is perhaps one of the most marmite stocks on the small cap market — investors who are in, really like the stock, and those who disagree with the investment thesis are fairly vocal in their opinions.
In a market where shareholders tend to be fairly outspoken anyway, this is some achievement — and is therefore worth an in-depth factual evaluation. Chill shares have more than doubled over the past year to 4.44p per share but have also fallen by circa two-thirds since hitting 13.05p in May 2023. This volatile performance is likely behind some of the divided investor positions, but the markets are ever forward-looking.
The key question is this: where next?
Let’s dive in.
Chill Brands: start with the product
When I cover ‘new tech’ shares — think Ondo Insurtech, Cizzle, Abingdon Health, OptiBiotix et al — my first question is always about the product. It needs to occupy a specific industry niche which is large enough to grow but also is actually worth making.
Ondo’s LeakBot, Cizzle’s lung test, Abingdon’s saliva pregnancy test, and Opti’s dietary ‘sugar’ fibres all meet this qualification with ease; at the end of the day, it’s the product that makes the company.
RKB
Open Offer Shares
I had to make an official complaint to my Broker because the Open Offer shares were not in my accounts.
This afternoon the Open Offer Shares were credited to my accounts and amalgamated with my other accounts.
RKB
A good friend has posted on Twitter that our Chill Zero nicotine free vapes are now available at WH Smith at Gatwick Airport.
Coming soon to a location near you.
RKB 🐝
Sunday Roast 12 Stocks of Christmas
https://audioboom.com/posts/8422010-12-stocks-for-the-12-days-of-christmas-featuring-callum-sommerton-ceo-of-chill-brands-lse-chll
RKB
Good Morning CitizenMatt
I talked to about 10 or 12 Vapers after they left the shops. All were smokers in the past, some are joint smokers – vapers. Unfortunately, none had heard of Chill Nicotine Free Vapes but I told them initially to go to our website or Amazon.
Now if I had a business card promoting our website, I could have given it to them, but I think there may be some legal issues with “punting” for business.
RKB
Observation
Last week my car was in for a service in our local town, so I had a few hours to pass.
I walked along the main street and within 100 metres on the same side of the road there were three Vape shops. These were well known companies which you now find in most shopping malls.
Two of these Vape shops were next door to each other and three doors down was the third Vape shop. Just along the road there was a News Agent shop which also had advertising in their window for Vapes.
On the opposite side of the road was an Electronics shop which also had advertising in their window for Vapes. One street away there was a phone repair shop that had Vapes displayed in their window.
I observed a constant stream of people going into the three main Vape shops and exiting with their Vapes and immediately starting to puff on them.
I checked the official size of the local population and area which was 22,000 people and 6.475 km²
There is a large Top 5 Supermarket in the small shopping mall and another Top 5 Supermarket about 2km away which also sell Vapes.
From my observations, I was surprised that a small town with only one main street and one small shopping mall could sustain the number of Vapes shops that it has. I spoke to the staff / owners of all three Vape shops (none had any nicotine free Vapes) and they said business was booming and they were looking at opening more shops locally.
If you do your own research and check-out your own area then you may find that the current trend in Vaping is growing fast and Chill Brands Nicotine Free Vapes has a place in this market.
RKB
Openheimer hypocrite
You posted on 22 December 2023 @ 8:23am
“This will be the stock for 2024. This will do a FITB style rise. Only a matter of time.”
You are a hypocrite and if you want to post positive or negative then check which nom-de-plume you are using.
RKB
InvestingGenius? You don’t get it and you have Level 2 and 18,457 Posts!
Sausages83 I don’t trust you, why would I? I did not highlight a Trade at 10:14am.
Ornamental I believe you have made a wise decision.
The reason why I highlighted the larger “Buy” Trades from Tuesday was to have a record of “possible” Trades that Market Makers are cancelling or reversing. Obviously, most of today’s larger Buys will be genuine purchases but I believe there is evidence of Market Manipulation of the Chill Trades and that is why I made a formal complaint. Now will any Financial Journalist be interested?
RKB
PS If you had a record of each Trade for the past two years then you may conclude that the large number of Cancelled Trades over the past two months is not “normal” You may also not be bothered that there could be manipulation. All I am aiming to achieve is an orderly Market in our shares.
Formal Complaint
I have made a formal complaint to LSE about possible Market Manipulation with Chill Brand Shares.
To have 26 Trades Reversed and 20 of these Trades are 100,000 or more and of these 20 Trades 80% are 200,000 or more.
Will we be informed over the coming days that the trades from today will be cancelled / reversed?
8:28am 100,000 will be reversed?
10:13am 400,000 will be reversed?
10:22am 100,000 will be reversed?
10:23am 500,000 will be reversed?
10:26am 100,000 will be reversed?
10:45am 200,000 will be reversed?
12:47 200,000 will be reversed?
RKB
No, they were not Bed & ISA, I have excluded them from my data.
The Volume for the first 9 days in December 2023 was about 26 million (I have excluded the “Cancelled Trades”
The Volume in November 2023 (22 Business Days) was about 16.2 million.
MM are short of shares and do what they do to make a Market in our Shares.
RKB
Cancelled Trades
Today we have another cancelled trade. There have been about 3.6 million cancelled trades in December (so far)
01/12/23 15:10 3.4p -150,000
04/12/23 16:49 3.215p -300,000
30/11/23 15:01 3.3p -250,000 Communicated on 06/12/23
30/11/23 15:32 2.7p -250,000 Communicated on 06/12/23
01/12/23 15:10 3.4p -150,000 Communicated on 06/12/23
07/12/23 08:48 3.3p -10,000
07/12/23 15:58 3p -212,393
11/12/23 08:31 3.4p -100,000
11/12/23 09:05 3.4p -30,000
11/12/23 11:28 4p -100,000
12/12/23 10:44 3.6p -30,000
12/12/23 10:45 3.6p -30,000
11/12/23 16:21 4p -250,000 Communicated on 12/12/23
13/12/23 08:40 3.5p -200,000
13/12/23 13:33 4.2p -250,000
13/12/23 13:53 4.2p -250,000
08/12/23 16:29 3.3p -300,000 Communicated on 13/12/23
08/12/23 16:29 3.3p -400,000 Communicated on 13/12/23
08/12/23 16:29 3.3p -300,000 Communicated on 13/12/23
And then this morning we have
13/12/23 13:53 4.2p -250,000 Communicated today.
Of the 20 above trades reversed / cancelled / never bought, 75% of them were listed as “Unknown” or we don’t want to say if they were buys or sells as we just wanted to alter the price as we are short of shares and need to hoodwink shareholders (buyers or sellers)
How long will LSE permit manipulation like the above?
RKB
Interim Results
Today’s Interim Results confirm the continuing improvement of Voyager Life’s Business Model.
Our Revenue increased by 22% to £165,000.
Inventory £101,000
Gross Margin continues to be 39%
Cash Balance at 30th September 2023 £551,000
No Debt.
Our Business has four revenue streams:
Online Sales
Sales through our three own stores in St Andrews, Dundee and Edinburgh
Sales through third party stores
White label and private label manufacturing for third parties (VoyagerCann)
Going Forward:
The Company's primary focus is on revenue generation and objectives in the coming months for our business lines are:
A) Online sales. We have seen an increase of our own brand sales online of more than three times since the summer of 2023 and we expect to build on this by increasing our focus on social media-led marketing strategies.
B) Own stores. It has been widely reported that high street sales in the UK have been under pressure and, to an extent, we have experienced this. However, a combination of attainable pricing strategies, new initiatives and attendance at local markets and fairs has kept revenue in this division broadly flat for the first four months of the period before August and September 2023 saw some shortfall. We have reduced staffing in this division to maintain margins.
C) Trade sales. As noted above, our successes with Pets at Home and Jollyes underpin our operations here and importantly demonstrate to counterparties that we are capable of servicing large contracts across multiple locations.
D) Contract manufacturing. VoyagerCann's website generates a steady flow of enquiries but we have recently updated it to showcase our widening capabilities. Larger contracts and repeat contracts endorse our commitment to quality and customer service and our push for more accreditations and food manufacturing approval, we believe, will add to appeal to both new and existing customers.
RKB
It appears there are many shares currently "Trading Halted"
RKB