Peak Asset Management is lead manager on the IPO and OnMarket has a limited allocation. The offer may close early and the 'Pay By' dates may change. Bids over $5,000 may be scaled back more heavily.
Candy Club Holdings Ltd (ASX: CLB) sells confectionery products direct to consumers through monthly subscription plans (the B2C Business) and to specialty market retailers (the B2B Business) through its operating subsidiary Candy Club LLC, a company incorporated in California, USA (CCL). Candy Club is headquartered in Los Angeles and currently only makes its products available to customers in 48 states of the USA.
Candy Club is able to utilise the data about preferences of subscribers under the B2C Business gathered on its online subscription platform to track shifts in consumer behaviour, to understand what subscribers prefer in real-time, facilitating product and supplier management and minimising stock wastage and can then sell the popular confectionery products through promotional partners and under-served speciality outlets as part of the B2B Business, thereby increasing consumer recognition of the Candy Club brand.
Candy Club Holdings Ltd is looking to raise between $4.5 million and $8 million with the ability to accept an extra $2 million in oversubscriptions and will have an estimated market capitalisation of $32.9 million at maximum subscription.
The proceeds from the Offer will be used to:
Procurement and Packaging
The Company purchases confectionery from various manufacturers based in USA and Europe which the Company rebrands and repackages with the Company’s own branding (Candy Club Branded Confectionery). Confectionery purchased for the Candy Club Business is delivered directly to and stored at warehouses operated by a third party logistics company (Fulfilment Company) in Indiana and Utah, USA. The Company outsources the repackaging function to the Fulfilment Company which also coordinates the delivery of the final products to the respective customers. The confectionery is first repackaged as Candy Club Branded Confectionery, which may then be sold directly as part of the B2B Business.
The Fulfilment Company also assists with sorting the Candy Club Branded Confectionery into boxes containing up to six varieties of the Candy Club Branded Confectionery (Candy Boxes), which are sold as part of the B2C Business.
Pictured below are the Candy Club Branded Confectionery
In 2015, Candy Club commenced selling monthly subscriptions of Candy Club Branded Confectionery to consumers throughout the USA. Consumers who purchase subscriptions via the Candy Club Group’s website receive a package containing up to six varieties of confectionery each month (Candy Boxes).
While subscriber numbers fluctuate, the Company estimates that there were between approximately 15,000 and 20,000 subscribers during any given month in 2018.
The Company is piloting selling subscriptions of the Candy Boxes through a major online retailer, which offers subscription plans for a variety of digital and physical products to its customers. Candy Club started selling subscriptions for the Candy Boxes through this online retailer in September 2018.
In mid-2018, Candy Club started selling the Candy Club Branded Confectionery contained in the Candy Boxes to specialty market retailers in the USA, including retailers operating in the hospitality, retail fashion, gift and e-commerce industries. The specialty market retailers purchase the Candy Club Branded Confectionery in bulk based on consumer demand which are sold in their physical or online stores together with their core products. Since the launch of the B2B Business, the Company has sold product to approximately 150 unique specialty market retailers representing 500 retail locations. Over 50% of total sales recorded to date under the B2B Business have been received as repeat orders from specialty market retailers. Pictured below are the Candy Boxes:
The Company generates income through:
The Candy Club Group’s operations have historically been based on a subscription retail business model, where individuals located in the USA can subscribe for monthly shipments of confectionery, based on a variety of plan types.
Subscription boxes are becoming an increasingly popular method of purchasing products online, with 15% of e-commerce shoppers estimated to have purchased a subscription for subscription boxes in the 12 months to November 2017. During Q1 2018, it was estimated that 18.5 million Americans visited at least one website offering subscription boxes, representing a 24% year-on-year increase.
The chocolate, sugar and gum categories have each experienced growth in 2017, delivering a 3.6% gain for the global confectionery industry in 2017. Total sales in the USA confectionery industry were US $35 billion in 2017, with the biggest growth category experienced in sugar confectionery which experienced a 3.9% increase in sales from 2016. The USA National Confectioner’s Association, an industry body for the USA confectionery industry, reports that in the USA, confectionery sales increased 1.8% in 2017, up from a growth of 1.2% in 2016, with non-chocolate sales (such as confectionery) leading growth.
The USA is by far the largest confectionery market in the world, accounting for more than 75% of the global confectionery volume share. Household penetration of confectionery was 97.2% in 2017, with the average US household purchasing confectionery 17.4 times per year. The average customer consumes confectionery two to three times a week, with 90% of USA consumers giving confectionery as a gift.
Candy Club Holdings Ltd Board is constituted of directors who have extensive skills and experience in both business operations and governance. The Board has a broad base of experience covering operational, technical, corporate and commercial backgrounds, spanning a number of decades and across a range of different industries. These include:
You are encouraged to read the Prospectus carefully as it contains detailed information about the Company and the Offer. Like all investments, an investment in the Company carries risk. As set out in Section 6 of the prospectus, Candy Club Holdings Ltd is subject to a range of risks, including but not limited to insufficient products to meet demand, customer acquisition costs, food safety and hygiene, supply of confectionery and privacy and data risks.
Section 734(6) disclosure: The issuer of the securities is Candy Club Holdings Limited ACN 629 598 778. The securities to be issued are ordinary shares. The disclosure document for the offer can be obtained by clicking on the link above. The offers of the securities are made in, or accompanied by, a copy of the disclosure document. Investors should consider the disclosure document in deciding whether to acquire the securities. Anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document (which can be done via the electronic application form which will become available by clicking the bid button above).
OnMarket has a limited allocation. The offer may close early and the 'Pay By' dates may change. Bids over $5,000 may be scaled back more heavily. Duplicate bids under the same investment profile, investor name or residential address may be cancelled.
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Candy Club Holdings Ltd (ASX: CLB) procures and rebrands confectionery goods, then sells direct to consumers and specialty market retailers in the United States. The company had 15,000-20,000 monthly subscribers during 2017 and generated ~A$11m in revenue. The US confectionery industry was worth US$35b in 2017 and accounted for 75% of global volumes.
The company has received firm committments from investors for the $12 million min offer size.
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