Shares of confectionary company, Yowie Group Ltd (ASX: YOW), have today jumped more than 15% on the back of an encouraging market update this morning.
Yowie is currently rolling out the iconic brand throughout America. It has ambitious plans to revitalise the children's chocolates in an enormous consumer market through a distribution network including leading retailers such as Walmart and Safeways.
Yowie chocolate is somewhat shielded from intense competition because it is the property rights owner of the unique brand and has exclusive access to the U.S. market, which requires companies to have a patent to sell encapsulated toy chocolates.
Only one of these patents has been issued and it's currently held by Yowie Group. It expires in 2018.
Yowie Group isn't resting on its laurels. The group has teamed up with massive names in the convenience, drug (chemist), grocery, and general retail sectors. At 31 March 2015, Yowie products were being rolled out/trialled in 5,089 stores, including 1,505 Walmart stores, and its factory in Florida was producing the equivalent of 7 million units per annum, with a capacity of 20 million.
To grow production from 20 million units to 40 million units would require an investment of just $600,000 and a 16-week lead time.
Since 31 March, Yowie Group shares have rallied 37%. And rightly so. Today's update more than supports the rally. Yowie said that following its trials with Walmart, it will now rollout the product to a total of 4,300 stores starting in August.
Obviously, this is a very encouraging sign and reinforces the potential consumer success of the Yowie growth story across America.
Is it too late to buy in?
Recently, I said to myself, "I'll wait for Yowie shares to drop to 50 cents before buying." Three months and 60% of gains later, I'm kicking myself for missing out. However, these latest results are really encouraging for me because I had reservations about the future uptake by big retailers and, importantly, consumers. The fact that Walmart wants more, is a big plus for me. For a speculative buy over the long term, Yowie could be worth a second look.
