Vital Farms, the largest producer of pasture-raised eggs, said in an S-1 filing with the U.S. Securities and Exchange Commission that it planned to go public through an IPO. It has applied to list its stock on the NASDAQ under the symbol VITL.
The company’s products, which are sold in retailers including Kroger, Sprouts Farmers Market, Target and Whole Foods, posted sales of $140.7 million in 2019, with net income of $3.3 million. Vital Farms started in 2007 on a 27-acre plot of land in Austin, Texas. It now offers 20 different SKUs in stores, including eggs and pasture-raised ghee and butter.
“We believe increased demand for natural food and a willingness to pay a premium for brands focused on transparency, sustainability and ethical values will continue to be a catalyst for our growth,” the company said in the filing.
Vital Farms, which touts itself as a producer of ethically raised foods, would go public by tapping into many of the hot trends important among consumers who want the brands they buy to stand for something. Among the most prominent in the food sector today is eating eggs and other animal products produced under more humane conditions.
In its S-1 filing with the SEC, Vital Farms talks extensively about how its past growth and future prospects have been fueled by increased consumer awareness of the negative health, environmental and agricultural impacts of processed food and factory farming. This is further borne out by the fact that revenue has soared more than 200% since 2015, and the number of stores carrying its brands — including large mainstream retailers — jumped from 4,233 five years ago to more than 13,000 today.
“We believe the success of our brand demonstrates that consumers are demanding premium products that meet a higher ethical standard,” the company said. “We have expanded into the mainstream channel while still continuing to command premium prices for our ethically produced products, which sell for as much as three times the price of commodity eggs.”
While the company has expanded into other pasture-raised products like butter, eggs make up the lion’s share of the company’s revenue and profits — an expectation Vital Farms said will hold for the foreseeable future. The 13-year-old company said eggs were responsible for $128.6 million, or 91%, of its net revenue in fiscal 2019.
If consumers keep paying more for products considered ethically produced and more people value those attributes, Vital Farms could have a long runway ahead for growth. It said it has low household penetration of 2% for its pasture-raised shell eggs, compared to the shell egg category penetration of approximately 93%. According to SPINS data cited by Vital Farms, the U.S. shell egg market in 2019 posted about $5.4 billion in retail sales.
Vital Farms, which works with 200 small family farms, is a Certified B Corporation, a coveted mark that tells consumers the company is adhering to standards and values that resonate with them personally: transparency, accountability and standing for something. Vital could potentially use that certification in marketing and separating itself from other big egg producers.
But competition is fierce in the sector and Vital Farms is not the only company producing eggs raised under conditions viewed as more hospitable to the animal. Industry giant Cal-Maine producers cage-free eggs, and Pete and Gerry’s raises its eggs from free range hens who roam organically-grown pastures. There also are other local and regional egg companies, as well as private-label specialty egg products, that serve as competition.
Vital Farms does have the scale, farmer connections and expertise with foods produced under these conditions that could give it an advantage.
The company also has shown a willingness to expand beyond just eggs in a carton to butter, hard boiled eggs, ghee and liquid whole eggs. Not only does Vital Farms have an opportunity to expand its market share in these categories, but it could potentially move into other areas such as milk or yogurt that are marketed under the same pasture-raised ethos. In moving forward with an IPO, Vital Farms would raise valuable funds that could expedite growth into these areas, attract other farmers into its expanding network and boost its 2% household penetration level cited in its S-1.