Veganz with weak first half of 2022 due to further economic slowdown

• A world in transition
• Lack of discount business, further growth in food service
• Focus on Germany and Europe
• Package of measures adopted
• Innovations to navigate turbulent times
• Guidance 2022 adjusted

(Berlin, 29 September 2022) Veganz Group AG (veganz.com), the only multi-category provider of vegan food in Europe, was also not spared from the effects of the war in Ukraine: apart from the incalculable human tragedy, there have also been major economic repercussions and significant risks for the real economy – especially with regard to global supply chains and sales markets, as well as energy needs and the provision of credit. As a result, the shortage of vital commodities continued and caused inflation to soar. Prices rose in almost all relevant areas of consumption, leading to general uncertainty among consumers and severely curbing their propensity to consume¹ – especially with regard to groceries: sales in the food retail sector declined more sharply than at any time since 1994².

Whereas in the first few months of the year the food retail and discount sectors focused on ensuring basic supplies for the population, the young core target group (Generation Z and Millennials+) have recently been hit particularly hard by the current price increases due to their lower incomes. However, the resulting scaling back of their lifestyle does not mean a fundamental change in their values and attitudes: climate and environmental protection continue to be strong drivers of the younger generation’s consumption decisions, even if their focus naturally shifts to other issues in times of crisis. Overall, these developments made the new listing of Veganz products and the planning of promotional activities in the discount sector almost impossible during the first six months of 2022. Due in particular to the loss of promotional business and the dwindling propensity of consumers to purchase goods, Veganz Group sales of EUR 12.6 million in the first six months of 2022 were down on the previous year (prior year: EUR 16.9 million). Likewise, sales at the individual company level of Veganz Group AG decreased to EUR 11.5 million (prior year: EUR 15.6 million). The number of points of sale (POS) as of 30 June 2022 decreased to 22,410 (31 December 2021: 25,199), whereby the decline of 3,340 POS in the discount sector due to the absence of promotional business was partially offset by the increased number of POS in the Company’s regular business. In a year-on-year comparison, the growing number of POS in its regular business more than compensated for the decline in its discount business by 2,160 POS (prior year: 22,264).

Lack of discount business, further growth in food service
In the first six months of 2022, food retail continued to account for the largest share of sales at 68 percent (prior year: 62 percent), with drugstores in second place at 24 percent (prior year: 24 percent). With a sales share of 8 percent (prior year: – percent), the new food service distribution channel achieved encouraging growth – at a time when many sporting events and company restaurants were and are still struggling with limited guest numbers and restrictions due to the ongoing COVID-19 pandemic. In addition to its cooperation with the German airline Eurowings, which has enabled passengers to enjoy climate-friendly ‘Veganz Gummy Bears’ on board its planes since May 2022, Veganz has also been cooperating with the foodvenience provider Valora since June 2022, which now also offers a selection of Veganz snacks at kiosks and petrol stations in Germany and Switzerland. In the first six months of 2022, the discount business, in which the Company does not yet have any fixed listings, suffered disproportionately from the Ukraine war compared to the same period last year, when it had exceptionally strong promotional activities: due to the absence of promotions, the Company was unable to generate any sales in this sector (prior year: 14 percent).

Focus on Germany and Europe
With a 92 percent share of sales, the DACH region (Germany, Austria, Switzerland) was once again the most important market in the first six months of 2022 (prior year: 92 percent). At 81 percent, Germany remained the largest single market and continues to be the main focus (prior year: 78 percent). At 8 percent, the share of sales in the rest of Europe was slightly up on the previous year (prior year: 7 percent) and Veganz sees further potential here: after being listed with the supermarket chains AB Basilopoulos, Market In, Sklavenitis and Krhtikos in Greece, among others, the Company has initially declared France as a further target market in which it aims to expand sales and business with Veganz products in the future.

Development of earnings
The gross profit margin of Veganz Group AG decreased to 28.1 percent (prior year: 31.5 percent), due in part to price increases imposed by suppliers. However, Veganz was able to partially offset these higher purchasing costs by negotiating prices with customers, which began to take effect at the end of the second quarter of 2022. As marketing expenses remained high at EUR 2.0 million (prior year: EUR 2.0 million), EBITDA and EBIT fell to EUR -5.8 million (prior year: EUR -3.0 million) and EUR -6.3 million (prior year: EUR -3.5 million), respectively. In addition to the decline in sales, this was due in particular to increased costs for the expanded sales force. The net loss for the period was EUR 6.8 million (prior year: net loss for the period of EUR 4.0 million). Thanks to its IPO in November 2021, the Company’s net cash and equity ratio as at 30 June 2022 remained significantly above the prior year at EUR 7.2 million (prior year: EUR -13.8 million) and 48.9 percent (prior year: – percent), respectively.

Package of measures adopted
In view of the changed market environment, the Company has initially launched three major measures with regard to in-house production, its field sales force and marketing:

Veganz has stopped investments for the construction of its planned Veganz Food Factory in Werder (Havel) and will implement the completed planning in a new context at another location in the German state of Brandenburg. Meanwhile, the Company is continuing to invest in smaller, temporary production facilities for the in-house production of meat, fish, cheese and egg alternatives. This will enable a liquidity-preserving ramp-up of in-house production, while at the same time allowing the Company to quickly adapt to the respective demand situation and minimise production start-up risks.

In order to improve sales efficiency, the Company already reduced its field sales force from 50 to 30 as of 31 July 2022 and will gradually reduce it further to approximately 20 employees by April 2023. In the event of any positive development in market conditions, however, the required capacities can be ramped up at short notice.

In addition, Veganz has changed the focus of its product communication and selected marketing channels and adapted its strategic marketing to the current business situation in order to significantly reduce its planned marketing activities and costs and to concentrate on defined core and focus categories, as well as products from its in-house production. The Company therefore no longer anticipates a general expansion of brand awareness, but rather a target group-specific increase in awareness of the Veganz brand in the fiscal year 2022.

Innovations to navigate turbulent times
As part of a research cooperation project with the Fraunhofer Institute for Molecular Biology and Applied Ecology IME in Aachen, Veganz has been working on the cultivation of peas in vertical farming since June 2022. The Company has thus found the perfect partner for testing sustainable cultivation options for the resources it needs, enabling it to systematically drive the agricultural turnaround required to feed the world’s steadily growing population in a sustainable and climate-friendly manner. This not only decouples it from volatile commodity markets and makes it more independent, but also reduces CO₂ emissions and water consumption.

Guidance 2022 adjusted
Depending on the macroeconomic conditions, Veganz now expects a significant (previously: slight) decrease in sales for the fiscal year 2022, both at Group level and at individual company level of Veganz Group AG (prior year: EUR 33.5 million and EUR 30.4 million, respectively), but continues to assume a slightly lower EBITDA compared to the previous year (prior year: EUR -9.8 million). Due to its adapted marketing activities, the Company no longer anticipates a general expansion of brand awareness, but rather a target group-specific increase in awareness of the Veganz brand in the fiscal year 2022.

"We are currently in the midst of a crisis that, just a year ago, none of us would have thought possible in this form and on this scale. With our immediately initiated package of measures, we have accepted the challenge – given the speed with which conditions are changing, our business development is nevertheless below our expectations," says Jan Bredack, CEO of Veganz Group AG. "The distribution and product optimisations, improved liquidity management and cost savings are the first important steps towards strengthening Veganz Group's operational performance already in the fiscal year 2022. However, we have identified further areas where we need to take action and are continuously working on improvements to our structures and processes as well as on improving our earnings power and competitiveness."

¹ Source: McKinsey Survey, June 2022
² Source: GfK Konsumklimaindex, June 2022

About Veganz Group AG
Veganz (veganz.de) – Good for you, better for everyone – is the brand for plant-based food. Founded in Berlin in 2011, Veganz became known as the European vegan supermarket chain. With a colourful and life-affirming corporate philosophy, Veganz succeeded in opening up the vegan niche and establishing the plant-based food trend on the market. The current product portfolio comprises products from breakfast to dinner and is available in more than half of all European countries and at over 22,000 points of sale (POS) worldwide. In addition, the Veganz product portfolio is continuously optimised with high-quality, innovative items and its sustainable value chain is constantly being improved. For this commitment, Veganz was voted Germany’s most innovative food brand in a Handelsblatt 2021 ranking.

Contact:
Veganz Group AG
Vanina Hoffmann
Head of Investor Relations
T: +49 (0)170 6837016
vanina.hoffmann@veganz.de