Special Report: US lolly seller Candy Club is betting that Australian investors have a sweet tooth and will fancy a taste of its $8m IPO this month.

The company (ASX:CLB) operates a candy subscription service as well as a B2B arm which places its sweets in speciality retailers, such as high-end fashion or food outlets.

The company is issuing shares at 20c each and anticipates an early January listing.

Candy Club is using traditional in-store sales and personal subscriptions as a two-hander: people buy a pack of Candy Club sweets in a store on a whim, but inside the box is an offer of a discount on their first month of a subscription.

The subscription business made $US8.4m ($11.7m) in calendar 2017 while the B2B division— which only launched in July—wrote $US600,000 in business in the last three months.

Richard Rouse of Peak Asset Management, Candy Club’s lead manager for the IPO, says the decision to build multiple sales channels from in-store to online is a key growth driver for the company.

“The candy market is enormous, it’s worth $US232bn globally. Right now, just in the US, it’s worth $US35bn and expected to grow to $US40bn by 2023,” he told Stockhead.

“Candy Club is tapping into that market with traditional in-store sales and subscriptions, a method that, surprisingly, is largely untried in the candy world.”

The company launched its direct-to-consumer business in 2015 and quickly reached 20,000 monthly subscribers, after which the company began focusing on improving retention rates and lifetime value.

The next step of launching the in-store sales this year has surpassed internal expectations and the company expects it to be a major growth driver in 2019. It expects to outpace the growing subscription business by early 2020.

All about the data

Candy Club says it uses customer preference data to track shifts in behaviour and understand what subscribers prefer in real-time, which in turn allows them to better manage supply chains and minimise wastage.

It also means the company knows which lollies will do best in which in-store locations.

Star line up

Candy Club is led by its founder Keith Cohn, a serial entrepreneur who founded US adtech ventures Vendare Media and Bardon Advisors, and used to market and grow product lines for Mattel and Hasbro.

He has managed to pull in some big Australian names as well: Aconex investor James Baillieu is a director, along with his boardroom colleague at Bid Energy (ASX:BID) Zachry Rosenberg, the founder of investment house Capital Zed.

They have also snared racing aficionado Robert Hines as chairman, who names Genetraks, CEO Circle and Sportsbet on his boardroom resume.

Building the business

Candy Club plans to use its IPO windfall to develop the new B2B business by increasing the number of retailers who carry the brand, and may look in future at moving into corporate gifting, corporate partnerships, promotional partnerships and white labelling opportunities.

It isn’t ignoring the subscription arm though, planning significantly increased spending on marketing and increasing the online and offline sources where they find new customers.

While the company does have ambitions to offer its sweets-as-a-service overseas one day, right now Australian investors will have to satisfy their sweet tooth with an investment, rather than a sugar-binge.

Additional company information can be found at http://candyclub.pages.ontraport.net or by contacting [email protected].au

Candy Club is a Stockhead advertiser.
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