Vital Farms Announces IPO

Ethical food company Vital Farms filed paperwork yesterday to raise up to $100 million in an initial public offering (IPO). The Austin-based company plans to list on the Nasdaq under the symbol VITL.

Founded in 2007 by the husband and wife team of Matthew O’Hayer and Catherine Steward, Vital Farms currently produces 20 retail products, including shell eggs, hard boiled eggs, butter and ghee, which are sold in over 13,000 stores. In an S-1 filing with the Securities and Exchange Commission (SEC), the company said it has increased its net revenues from $1.9 million in 2010 to $140.7 million in 2019. From its original 27 acre plot of land in Austin, the company has expanded to partner with over 200 family farms across the “Pasture Belt.”

Vital Farms has previously raised funding from several funds, including a 2017 round which included a roughly $10 million investment by Sunrise Strategic Partners and approximately $1 million investment by Bowie Strategic Investments, the investment unit of Whole Foods Market. Other investors in the company include Manna Tree Partners, SJF Ventures and InvestEco Capital Corp.

The filing outlines the company’s three pronged approach to growing revenues, starting with continuing to grow its customer base for its existing products. Shell eggs currently have a 93% household penetration while Vital Farms’ pasture-raised eggs only have a 2% household penetration. Second, the company plans to expand into new channels, such as drug, club and military, as well as grow distribution overseas. This latter goal could be accomplished in the near term with its newer line of shelf stable ghee butters.The third goal will be to continue to innovate and launch new products beyond shell eggs, which currently account for roughly 90% of the company’s sales. A key focus area will be the refrigerated value-added dairy category, which the company says represents a total addressable market of $33.2 billion and “is the closest adjacency and best near-term opportunity for our brand.”

“The success of our product portfolio and our proprietary consumer surveys confirm our belief that there is significant demand for our brand across a wide spectrum of food categories,” the prospectus said.

But innovation can also take time, the company warned. For example, while it hoped to launch a line of pre-cooked egg bites in August of this year, the prospectus noted that packaging issues have delayed the launch timeline.

In addition to what it sells, the company is also placing emphasis on how it does business. With over 160 employees, Vital Farms practices a “conscious capitalism” business model and is also a certified B-Corporation. In the SEC documents, the company maintained its focus on ethics and sustainability was one reason consumers continue to purchase its products, with 31% of its shoppers saying they would only buy Vital Farms pasture-raised eggs.

And with the Covid-19 pandemic raising consumer awareness of the issues surrounding factoring farming, this emphasis could prove to be even more compelling in the coming years.

“We are motivated by the influence we have on rural communities through creating impactful, long-term business opportunities for small family farmers,” the document stated. “Moreover, we are driven to stand up for sustainable production practices that have been largely cast aside under the factory farming system. In our view, this system has been consistently misguided, focused on producing products at lowest cost rather than driving long-term and sustainable benefits for all stakeholders.”