August 16, 2016

The highly anticipated sharemarket listing of Australian organic dried vine fruit company, Murray River Organics, is expected to value the company at around A$150 million, following an over subscription of its pre-Initial Public Offering (IPO) of A$15 million.

Situated across more than 1,600 hectares in the Sunraysia region in north west Victoria, Murray River Organics is Australia’s largest integrated producer of commercial quantities of sultanas, Thompson seedless raisins, sun muscat raisins, currants, diamond muscats and clusters. As a fully vertically integrated organic food business, Murray River Organics owns its entire supply chain, operating from primary production of the fruit, through packaging, sales/marketing and distribution. The company plans to use the funds raised to strengthen its position and capabilities throughout the supply chain.

With a listing anticipated for the fourth quarter, Murray River Organics is in a strong position to capitalize on the fast growing interest from investors in consumer demand for healthier food and the opportunity to close the gap between this demand and the ability for the market to supply.

The organic food market is one of the fastest growing food sectors globally, estimated to continue to grow from US$72 billion in 2013 to US$188 billion by 2019. According to Murray River Organics Managing Director Erling Sorenson, the key drivers for this development are changing consumer perceptions regarding the impact of conventional foods on human health moving the industry towards organics; government labeling programs helping consumers identify legitimate organic products, building trust and driving growth and; increasing affordability of organic food and drink is expanding the consumer base.

Earlier this week, Mr. Sorenson shared with GAI News his insights into how the company came to be a market leader on a global scale:

GAI: You must be pleased with the amount of interest in Murray River Organics’ pre-IPO, what do you think are the main reasons for this interest?

ES: Investors and people in general are becoming progressively alert to the notion that with a growing global population, there is an increasing number of consumers wanting to eat healthier food, however there is and will be less land available to source this food from.

The Economist has estimated that humans in the next 40 years will need to produce more food than they did in the previous 10,000 years put together. The investable universe tends to be focused on either agricultural production or food demand. We believe the two are tied at the hip. A food company can only package and sell food if it has been produced in the first place. Very few companies and hence investable opportunities provide an investor with exposure both to agricultural production, food demand and global markets.

GAI: How would you describe Murray River Organics’ place in the Australian food sector?

ES: Murray River Organics is the largest fully vertically integrated producer and marketer of organic dried vine fruit in the world. We do not look at the Australian food sector in an isolated sense. We are a global business and Murray River Organics is positioning itself favorably in a global landscape where the interdependence of food manufacturers and retailers on topics such as food safety, sustainability, animal welfare, and labour laws will create a new level of competition that will favour supply-system innovation that takes advantage of the scale and influence of the network.

Rapid shifts in consumer tastes and a constrained supply base will dramatically increase the interdependencies of partners in the supply chain, as will food safety and transparency concerns. Food companies will struggle to balance supply continuity, price sensitivity, and speed intensification. Only the strongest networks will be able to successfully meet these challenges while restricted availability of agricultural commodities and ingredients will drive the shape of the bottle neck in the global food industry.

Global scale will become increasingly important to meet emerging market demand and secure access to constrained resources. Murray River Organics is becoming a leading organic, natural and ‘better-for-you’ food products company, servicing customers globally. Our addressable market includes: Global Snacking Market (valued at US$400 billion per year and expected to grow to US$630 billion per year by 2020); Global Private Label Market (valued at US$1 trillion per year); Global Food Service Market; and Global Ingredient Market.

GAI: How would you describe the current organic dried fruit market in Australia and on a global scale?

ES: As a proportion of the total global market, organic is still very small. When compared to other food groups, there is still tremendous growth to come in organic dried vine fruit. The growth is restricted by lack of supply. It is important to note that not all produce which is claimed to be organic can be classified equally as such. There is a big difference in the degree of authenticity of organic produce from the different producing nations. The companies and people we count as our customers choose to view organic produce through different lenses depending on whether a product originates from Australia, California, Uzbekistan, Iran, China or Turkey and depending on which certifying body is used to audit the farms, factory and products. Our certifying body, Australian Certified Organic (ACO), is considered one of the most stringent in the world and held in high esteem in most jurisdictions and by most customers.

Consumption of organic products on a per capita basis is still highest in places like Switzerland and Denmark at Euro 210 and 163 respectively. The USA at only Euro 77 is trailing by more than 50 percent. Median consumption across all countries (for which data is available) is only Euro 32. So we have lots of growth ahead of us, and we are not dependent on the growth of only one market, such as China, which many other companies appear to have become reliant on.

GAI: In which segments of the market (both domestic and export) does Murray River Organics see the best opportunities for growth, does the company have any particular strategies in place to meet any gaps in the market?

ES: The market we service is the organic, natural and better-for-you food markets. This is a global growth market and we look to expand our regional offices from the current one in Europe to also soon include an office in North America, one in North Asia (servicing Japan, Taiwan and South Korea) and one in China – to better service and expand our customer base in each of these locations.

Murray River Organics’ focus has always been on the ability to service global markets, and never becoming too reliant on any one market or customer. The majority of our business is from export markets and as we continue to expand our business, the ratio of export will likely continue to increase.

GAI: What are the key drivers for exports out of Australia and can you identify any new product/consumer trends that are influencing these drivers?

ES: The key driver, and a great vindication of our strategy, is the overarching thematic of the growing importance of the organic/natural/healthy food sector. Food safety, traceability, trustworthiness, authenticity, providence and sustainability are factors supportive of Murray River Organics produce. To this effect, the Nielsen Group has recently released a research piece (based on respondents from 61 countries) which confirms that health and wellness is a top priority for consumers around the world, with 67 percent of global respondents stating they actively seek products with healthy ingredients. Furthermore, the research piece stated that 57 percent of consumers globally rate high-quality produce and 54 percent rate product availability as more influential decisions than lowest price. It’s very interesting times for us at Murray River Organics.

—

Melissa Lawrence, GAI News writer