Written by: Aaron Katsman | October 22, 2007
Aaron Katsman
www.IsraelNewsletter.com
I was never big on bragging, well maybe I was, just never had much of a chance, but today’s news that G. Willi Food Intl (WILC) signed a binding term sheet with the owners of a Russian dairy distributor was predicted. The distributor is a leading supplier and importer of dairy products in Russia, and together they will form a new joint company. Willi Food would hold a 51% interest in the new company. This reminds me of the Philosopher Kings classic lyrics, “I am the man, that’s what I am. I’m a straight shooter with a master plan.” Okay, to all you jokesters out there (and you know who you are) who are now going to remind me of some of my less-than-stellar analysis, give me a break and let me have my fun.
For ‘07, analysts think this distributor will sell roughly 36,000 tons of cheese products to a base of over 1,000 customers in Russia and generate an estimated $120 million in sales. According to HLB Prime Advice, a Russian appraisal company, the distributor is a leading distributor of all cheese types in Russia and the biggest supplier of hard cheeses such as Gouda and Edam to this market. I love my GOUDA cheese! Nothing like watching football with some Gouda and crackers. This follows on what I have said in the past: that G. Willi is making a big push into the Russian food market. It’s become clear that with growing wealth and more disposable income, Russian consumers have created a large demand for imported, premium products. G. Willi can help satisfy that demand with their broad selection of healthy dairy products and other foodstuff.
Mr. Zwi Williger, President and COO of Willi Food commented, “We are very excited about this transaction, which represents a bold step for Willi Food as we continue to expand our global footprint. According to market data, over 650,000 tons of cheeses are consumed in Russia each year of which roughly 50% is imported. We believe that NewCo will provide a well-developed distribution platform for Willi Food and its subsidiaries to drive market demand for dairy products in all categories including premium branded products, kosher and healthy living styled dairy products, as well as other categories.”
As I write this, my local Dolphins fan (ouch), Zack “Facebook“Miller, asks,” What’s their competitive moat?” First of all, what the heck is a Moat? Anyway, the answer lies in Arkadi Gaydamak. He owns the parent company Willi Food Investments and he is the largest egg distributor in Russia. He himself is a huge distribution channel, and with this new deal, look out. Willi will carve out nice marketshare in the Russian food market.
How is that for some Moat!
If you are looking for a small food company that’s about to explode onto the global scene, have a long look at G. Willi. The stock has taken a hit, and looks attractive as a long-term investment.
Please see our Disclaimer HERE.
Disclosure: Author has a position in WILC as of 10/22/07. Author has no holdings in any other stock mentioned.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | October 7, 2007
By Aaron Katsman
www.IsraelNewsletter.com
I have received many requests by loyal Newsletter readers, to help clarify last week’s announcement of a non-binding memorandum of understanding to buy 51% of the Russian eggs and slaughterhouse company owned by Arcadi Gaydamak(also majority owner of G.Willi) for an estimated $32.6 million.
As it was a holiday week in Israel, there were conflicting reports as to which entity was the potential buyer. G.Willi(WILC) or Willi Food Investments( the parent company which trades on the Tel-Aviv exchange). Thanks to alert reader Amit Chokshi, who was correct to note that it was indeed the Israeli company, who may do to the deal.
The question many have asked me is if there will be any impact for WILC shareholders?
I think the answer is a resounding “Yes”.
G. Willi will now enjoy a huge distribution channel in Russia for all of their food business. G. Willi had no penetration into this market and if their parent company does a deal in Russia, it will certainly help G. Willi gain a foothold there.
I actually think US investors are underestimating this potential and the stock is still trading at very attractive levels.
Please see our Disclaimer HERE.
Disclosure: Author’s fund is long WILC as of 10/07/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Zack Miller | September 2, 2007
When I look back at the whole Whole Foods (WFMI) run up, I kick myself.
Like Peter Lynch’s “Buy what you know” mantra, I look back to my college years in Boston (Go Crimson!) and remember less fondly all the money I dropped at the Whole Foods in Brookline.
Whole Foods was amazing — a clean, friendly supermarket with the most beautiful looking produce I’d ever seen outside of Israel. Whole Foods was the grown-up big sister to your local produce market and just ran circles around other supermarkets in terms of quality and experience. Margins were better, revenues ramped, and investors were rewarded handsomely. Between 1995 and 2005, investors would have seen a 2700% gain in their investments.
Not too shabby.
Now the game is a bit harder. Most supermarkets have a “Green” section of the store. Other chains have emerged.
I think the health food industry today in Israel is where the health food industry was in America in 1995, pre- the massive Whole Foods thing.
Enter Blue Square-Israel (BSI), one of the leading food (and non-food) chains in the country. As of the end of 2006, BSI owned 175 supermarkets under the brand names, Mega, Super Center and Shefa Shuk. As of December 31, 2006, Blue Square operated 39 Mega Stores, consisting of approximately 160,500 square meters space, 95 Super Center stores, consisting of approximately 96,200 square meters space, and 41 Shefa Shuk stores, consisting of approximately 66,600 square meters space.
I happen to shop at Mega (prices good enough to make my colleague, Aaron “Instant Rebate” Katsman, take note) , so I read with interest a Globes article with the scoop that Blue Square may begin rolling-out a big-box health food chain based on their 51% investment in Eden Teva Market Ltd. ($22.5 million) a month ago.
I guess if I had been paying the attention required at a Cambridge-based school, I would have noticed Blue Square-Israel telegraph the same info about a month ago in a PR. See that press release here. In the PR, BSI says itself that it “intends to extend the Eden Teva Market brand quickly throughout Israel, leveraging its greater financial and organizational resources with a goal of opening 8-10 stores in the next 3 years.”
BSI sniffs an opportunity to consolidate the fledgling organic market. With less than 250 outlets of organic food in the entire country (most of them micro mom-and-pops), Eden Teva, and more specifically, Blue Square-Israel, is putting its money where other peoples’ mouths are. Dropping off my kids today for the first day 0f nursery school and primary schools, I was overwhelmed at the amount of healthy food (organic and macrobiotic) some of these kids carried with them (I am not convinced they ate any of it).
So much for a Snickers bar.
Anyway, Blue Square may be worth a look. BSI is launching a three-pronged approach to continue on a new growth trajectory:
In-Town Discount Shopping: Instead of making people drive out to the boonies to save a shekel or two, BSI’s Mega brand will be repurposing a number of in-town stores to begin discounting products for the price-sensitive Israeli shopper.
Expansion of the Non-Food Properties: Through its Kfar Ha’shaashuim subsidiary, BSI currently controls 73 toy stores, 45 dollar stores, 45 homeware stores and 21 baby supply outlets, most of which are operated via franchise. To take its Non-Food activities to the next level, Blue Square has begun carrying out an aggressive acquisition of Non-Food retail chains including interest in Vardinon, an Israeli company with 30 home textile shops, and another in Naaman Porcelain, an Israeli company with 20 houseware shops.
Health Food Expansion: As I mention above, BSI is getting serious about taking the lead on big-box health food retailing. Israel Today suggests the current market for organic and health food in Israel totals about $600M.
BSI has a market cap of $550M, so it flies under most radar screens. It has a trailing 12 month P/E of 11.22 and a Price/Sales ratio (TTM) of .34 — both ratios lower than its larger cap competitors. It looks pretty interesting here and if any of the strategic initiatives pan-out, BSI could perk up.
Disclosure: Author’s fund does not have a position in any of the stocks mentioned here as of 9/2/07.
Please see our Disclaimer HERE.
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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com
Written by: Aaron Katsman | July 12, 2007
By Aaron Katsman
www.IsraelNewsletter.com
G. Willi-Food, one of Israel’s fastest growing food companies, came out with guidance for Q2, ahead of their full quarterly report due out in August. The company announced that it expects to report an approximate 27% increase in revenues for the second quarter over Q2 ‘06 and an approximate 29% increase in revenue for the first half of 2007 over the prior year’s period.
Willi Food continues to execute their business model, and drive their expansion into the US kosher food market. As I have posted in the past, the kosher food market is very large and growing rapidly. Look for WILC to continue to profit from this trend for years to come.
Please see our Disclaimer HERE.
Disclosure: Author’s fund is long WILC as of 7/12/07.
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Aaron Katsman is the lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
