BUDA Details Ultra Fresh Expansion, New Plants and Wholesale Growth Strategy

Key Points

• BUDA is expanding its wholesale “Ultra Fresh” beverage business, serving about 600 stores including H-E-B, Walmart and Kroger. The company is adding products such as juice shots, lemonades, citrus juices and dressings while prioritizing growth with existing retail customers.
• The company is increasing production capacity through an expanded Dallas facility and plans for new plants on the East Coast and West Coast. Each planned facility is expected to support roughly $55 million in annual revenue capacity.
• Management reported more than 40% growth in the first six weeks of the third quarter, said BUDA is profitable with no debt and $20 million in cash, and highlighted its refrigerated “Fresh35°” supply chain. BUDA also faces commodity-cost exposure, particularly from citrus prices, but said it can adjust pricing as conditions change.

BUDA NYSEAMERICAN: BUDA outlined its strategy to expand distribution of its “Ultra Fresh” juice and beverage products, emphasizing a wholesale model, a refrigerated supply chain and plans to add production capacity in the eastern and western United States.

During a company presentation, management said the business began in 2014 with a small refrigerator in a Plano coffee shop before opening 25 company-operated retail stores. After gaining shelf placement at H-E-B, the company shifted away from operating its own stores and moved to a wholesale-only model, a transition that accelerated during the COVID-19 pandemic.

The company said its products are carried in grocery produce departments rather than in conventional beverage sections. Its “Fresh35°” cold-chain system keeps products at 35 degrees Fahrenheit from sourcing through delivery to consumers, according to management. The company said the system supports shelf lives of roughly 14 to 21 days, depending on the product.

Distribution and product expansion

BUDA said it currently serves approximately 600 stores, including H-E-B, Walmart and Kroger. The company has supplied H-E-B for eight years and said it has expanded from two products to as many as 14 SKUs in larger H-E-B locations. Walmart and Kroger are newer customers, with BUDA currently in about 246 Walmart stores across nine states, management said.

The company’s product lineup includes juice shots, lemonades, orange juice, lime juice and lemon juice. Management said it is also adding three production lines for dressings, including ranch dressing, thinner dressings such as balsamic vinaigrette, Italian and Caesar, and single-serve cups. One customer previously made ranch dressing internally and has outsourced that production to BUDA, according to the presentation.

Management said its larger 52-ounce bottles retail for about $5.98 to $5.99, while a smaller bottle sells for about $1.28 at Walmart. The company positioned its products as fresh offerings sold at value-oriented price points.

Manufacturing footprint plans

Following its January IPO, BUDA said it expanded its Dallas facility from 20,000 square feet to 40,000 square feet. Management said the plant has annual revenue capacity of approximately $55 million and is receiving additional cooling, automation and new production lines.

The company plans to open an East Coast facility next year, initially focused on the southern and southeastern U.S. Management said the facility would likely mirror the Dallas plant, with approximately 40,000 square feet and about $55 million of annual revenue capacity. A similar West Coast plant, potentially located in Phoenix or Nevada, could follow in the subsequent year.

Management said it has benefited from industry relationships associated with Executive Chairman Bryan Herr, who also owns Country Fresh. Country Fresh operates in freshly cut fruit and vegetables and has a national refrigerated distribution network. BUDA described Country Fresh’s multi-plant infrastructure and distribution model as a playbook for its own expansion.

Growth, profitability and supply considerations

BUDA said it experienced growth of more than 40% during the first six weeks of the third quarter, including about 20% organic growth from same-store sales and existing SKUs. Management said the company is profitable, has no debt and has $20 million in cash.

In response to an analyst question about stock performance, management said the company is focused on executing its operating plan and noted that the three founders collectively own about 65% of the company, leaving a relatively limited public float.

The company sources Valencia oranges from California and Mexico, while lemons and limes are among its principal ingredients. Management said lime prices rose sharply during the first and part of the second quarter following disruptions in Mexico, but had normalized by the third quarter. The company said it has previously passed higher produce costs through to customers and reduced pricing when commodity conditions improved.

Management said it sees additional long-term distribution opportunities with retailers including Target, Publix, Harris Teeter, Wegmans, Safeway and Albertsons, as well as convenience stores, hospitality venues and warehouse clubs. However, it said its near-term priority is expanding with existing grocery customers, introducing new SKUs and maintaining profitability.

About BUDA (NYSEAMERICAN:BUDA)

Buda Juice Inc is a juice category for the supermarket fresh produce department with its cold-crafted, UltraFresh(TM) citrus juices. Buda Juice Inc is based in DALLAS.

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