Lotus Bakeries NV (LOTB.BR)
Founder family-owned and led Belgian producer of biscuits (Biscoff) and confectionaries with strong brand moats and growth prospects in the healthy snacking market (Nakd).
Key Facts
Description: Lotus Bakeries (LOTB.BR) is a Belgian producer of various types of biscuits, waffles, chocolate, ice cream and other types of confectionery. Since 2015 it has also been a major producer of healthy snacks. It was founded in 1932 by 3 brothers Jan, Emiel and Henri Boone and started as a producer of traditional Belgian caramelised biscuits. The company is 50% owned (65% controlled) by the Boone family and one of the founder's grandsons, Jan Boone Junior, is the current CEO.
Track record: Over the last 10 years Lotus has grown its revenue at 11.4% CAGR (12.1% over the last 5 years) and its EPS at a CAGR of 15.2% (11.3% over the last 5 and 11.7% over the last 3). It has achieved that by expanding its primary Lotus Biscoff brand internationally whilst adding to the product mix, acquiring strong local brands in its established markets, and investing heavily in its Natural Foods segment (16% CAGR since 2015 and 24% YoY in 2022). It has done that amidst a 16.6% 10-year average ROIC and fairly low debt (0.47 D/E).
Market cap: Its market cap as of the 8th of August 2023 is EUR 5.93 billion ($6.49 billion). It has grown at a CAGR of ~40.8% over the last 5 years. It is also ~46.5% up from its 52-week low.
Valuation: LOTB.BR trades at a TTM P/E of 57.6x (5-year average of 39.7x) and an EV/EBIT of 38.1x (5-year average of 31.3x).
Business Overview
Background
Lotus Bakeries is the biggest biscuit and confectionery producer in Belgium and one of the major ones in Europe. The company produces food in multiple categories including coffee biscuits, sandwich cookies, ice cream, chocolate, spreads, waffles, and healthy snacks. However, it is especially known as the producer of the Lotus Biscoff brand, which is by far the most famous biscuit brand in Belgium and many parts of Europe. Other notable brands (besides Lotus Biscoff) in the company’s portfolio include Nakd, TREK, BEAR, Kiddylicious, Suzy, Peijnenburg, Snelle Jelle, Anna’s Pepparkakor, and Dinosaurus.
Lotus Biscoff’s name comes from the Lotus flower (symbol of purity) and the combination of the words Biscuit and Coffee. The capture of the “consumer’s mind” by the brand (not only in Belgium) cannot be understated. Most people easily recognise Lotus products and tend to associate them with quality. This is reflected in relatively high price points as Lotus products are usually priced higher than other branded alternatives and private labels.
The company is known to be careful when introducing new products, however, it has greatly expanded its range over the last few years. New Lotus products tend to be popular likely due to the combination of that conservative reputation and many new recent product rollouts. Lotus builds on its classic biscuits when introducing new products by making them classic Lotus flavours or including part of the classic biscuit in the new product in one way or another. This way the company has introduced Lotus Biscoff spread, ice cream, sandwich cookies, and chocolate.
By expanding its product range into non-biscuit products like the spread or ice cream, the company wants to be present in different sections of stores as it thinks that cross-fertilisation between different areas will boost its brand awareness.
Lotus Biscoff products are also used as ingredients by other companies and food manufacturers. A good example is Cake Box and other cake makers using Biscoff spread and biscuits in their products. This has also been a part of the company’s strategy whereby it partners with other companies like Danone, Nestle and McDonald's who use Biscoff in their products. These products made with Lotus have an official distinctive red seal saying “Created with Lotus Biscoff”.
The strength of the Lotus Biscoff brand is probably best presented by when the company changed the name of its classic speculoos biscuits to Biscoff. There was an outrage on social media as the consumers wanted to keep the classic speculoos name and hashtags like #JeSuisSpeculoos started appearing on social media. Such a zealous reaction shows that Lotus’s customers are emotionally involved with the product and brand.
(Me with the Lotus sandwich cookies still bearing the Speculoos name; Antwerp Central Station 🙂)
Lotus Bakeries has also started expanding into the healthy snacking segment by acquiring brands such as Nakd, TREK, BEAR, and Kiddylicious and starting its venture fund whose purpose is to acquire early minority stakes in small promising food businesses (mostly in the healthy snacking segment). Lotus Natural Foods segment has grown at a CAGR of 16% since its acquisition in 2015 and 24% last year.
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