TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH KAILIS ORGANIC, MANAGING DIRECTOR, MARK KAILIS
James Lush: Hello James Lush reporting for the Finance News Network. Joining us today on FNN is MD of Kailis Organic, Mark Kailis. Mark welcome to FNN. Can you start by introducing Kailis Organic Olive Groves Limited?
Mark Kailis: Kailis Organic Olive Groves is a company that was founded back in 2001. It is an organic olive grove business that grows organic olive fruit, converts it into beautiful extra virgin organic olive oil and then sells it to the market place worldwide.
James Lush: What are you seeking to do?
Mark Kailis: Well at this stage we’re looking to purchase four very large properties that we’ve been managing on behalf of Great Southern for the last five years, and those properties are the foundation stone of the business.
James Lush: How much are you looking to raise?
Mark Kailis: Around $30 million and that is in a very tight time frame as well.
James Lush: And why have you chosen not to list on the ASX?
Mark Kailis: Fundamentally we’re not ready to list on the ASX yet. We will be ready, I would say in about a year and a half to two year’s time.
James Lush: What attracted you to the olive assets of the Great Southern?
Mark Kailis: Well we were already in the olive assets of the Great Southern. Great Southern came to us originally and asked us to - well purchased our first olive property - and then asked us to expand out their business. We did so over around a five year period - that took us to around 1,795 hectares and it involves four properties. So what placed us or allowed us to take these properties at this point, fundamentally is the fact that we are the managers of the properties.
James Lush: And specifically can you detail what you’re buying?
Mark Kailis: We’re buying four properties Preston Valley, Avon Valley, Twin Brooks and Dandaragon. They are: Preston Valley south of Perth, Avon Valley east of Perth and Dandaragon and Twin Brooks are north of Perth. So those four properties have around 1,795 hectares of olives and infrastructure planted out on them, and we’re buying those assets.
James Lush: What’s your experience in the production and marketing of olive oil?
Mark Kailis: Well I’m a winemaker by trade and when we set up this business back in 2001, we’d already previously been growing olives for around about fifteen years and we’d been mucking around with new olive planting platforms, and new olive varieties as well. So the time that we set the business up, we already had a great deal of experience in not only growing different varieties of olives within our climate in Australia, but fundamentally how those varieties come together as a blend and what flavours they produce.The organic component of what we have introduced into our business is fundamental to what we’re doing and our management practises as well, because it allows us to have a demonstrable premium. Now our experience in marketing products worldwide is that you have to have some sort of a demonstrable premium, otherwise you sit with the rest of the products on the supermarket shelf. Organic is our number one demonstrable premium.
James Lush: And what about the management of an operation this size, is that something you’re prepared for?
Mark Kailis: We are fundamentally, very prepared for the growth that will come with these assets. We’ve been very patient over the past fourteen years or thereabouts, with the whole concept of what we’re dealing with here in the olive industry. In the last nine years, more so with what we’ve been establishing specifically with this company and in the last four years or five years with Great Southern, in growing these very large super properties. Now moving forward, the model that we have is about taking volume of organic extra virgin olive oil into the world market and we’re all like coiled springs, waiting for that opportunity.
James Lush: Obviously profit is a very important part of the business. How has the price performed in recent years?
Mark Kailis: Well with the, you know, crisis that’s existed in the last you know two years in the world, there has seen commodity prices drop just about everywhere. Olive oil hasn’t been any different; it has suffered commodity loss in conventional olive oil. In organic olive oil, certainly in the organic sector, there has been a drop. But what you’ve got to realise is that - and this is fundamental to the reason why we’re in this business, is that organic is the world’s largest growth sector in food that exists today. And the reason for that is that people - it’s a ground swell, from people who are fundamentally sick of eating foods that are full of chemicals and they’re looking to a healthier food platform as well as a more sustainable food platform.So the ground swell’s coming out of just general people that want a healthier food supply and really that ground swell has kept that growth alive even through the GFC. And we’re seeing growth rates, you know in America for example, 17% throughout the GFC and that’s unheard of in the food industry.
James Lush: What about returns, what returns are you forecasting?
Mark Kailis: Well returns are difficult for us to go into because of the rules of ASIC, but our returns certainly are very healthy. Look at our family to understand that, you know, we are a family built on success in the food industry and I can assure you that the senior members of my family wouldn’t be around if this wasn’t going to make a profit, and a good one at that.
James Lush: What differentiates you from other produces say for example, in Spain or other parts of Europe?
Mark Kailis: Well look in Europe there are heavy subsidies on olive oil and that really has had to sharpen Australia’s act up. So in Australia we’ve looked more to mechanisation to lower our costs, we’re no different in that instance. Our costs are, obviously without the subsidies you know, greatly impacted on. However, in Australia with the advancements of mechanisation, modern planting grids that we’re using and just better scales of economy, we’re able to combat or we’re able to fight against those pricings – the low prices that the Europeans have.Now couple that with the organic premium and you can understand that our positioning of our product is not about taking conventional olive oil and putting it into the market place, it’s about taking organic extra virgin olive oil and putting it into the mid marketplace of olive oil.
James Lush: Finally you obviously have some very good looking products in front of me, what about cracking the supermarkets’ model, is this something that will be aiming into that area?
Mark Kailis: Sure, well fundamentally again this is our fighting brand; Splish Organic is a whole new way of looking at organic within the market. Glass is beautiful, tactile, has a very, very big sex appeal. You might look at this and say well maybe not but in the world that we have today where recycling is so important, this product in the UK and the American markets are very, very important. In fact some people have compared it potentially to the Yellow Tail of extra virgin olive oil for America and the reason for that is, that it not only deals with sustainable platforms, organic pesticide free foods certified, but it also deals with the recycling and the package that it’s put in. So this is the world’s most modern packaging to have the world’s best extra virgin olive oil – organic olive oil in - so we call this beyond organic. Now in Australia this will retail at under $10 compared to the $30 mark that the glass sits in. So you can see this is a supermarket fighting brand that we believe is going to be, you know, the future of organic extra virgin olive oil – Splish Organic.
James Lush: Mark all the very best with your Prospectus.
Mark Kailis: Thank you James.
James Lush: That’s Mark Kailis from Kailis Organic.
