Sale #9: Sold Oliver’s Real Foods

I’ve sold Oliver’s Real Foods (ASX: OLI), hopefully not permanently, but I’ve seen a few things that made me uncomfortable. In a nutshell it appears to me as though this company is being managed for the short term, not a lifetime.

The original thesis went like this:

  • Oliver’s has great niche and underserved customers, minimal competition in its niche due to nature of servo leases + roadside properties
  • Small and ability to become several times larger via steady roll-out of stores
  • There were some negative reviews on franchised restaurants; after they were bought back, and with some corporate attention I assumed quality would improve (anecdotally the worst restaurant looks quite sharp now, so I thought there was progress)
  • However I also thought that Oliver’s was priced at basically the maximum of what the market would pay. I thought that customer price point was a bit elastic due to the nature of the product, but if Oliver’s put prices up any further, they’d risk damaging their brand/alienating customers. (Oliver’s then raised prices in the most recent quarter.)
  • I thought that their fresh food supply chain was an important weakness and expected the company to expand steadily partly as a result of that (ability to source supply was constrained).


Things were progressing OK, except:

  • There has been a heap of negative reviews on Facebook in recent months even after accounting for school holidays.
  • Negative reviews overwhelmingly focus on a) unfresh food and b) pricing.
  • Oliver’s put prices up in its latest quarter. This means that its quoted SSS growth of 5.7% is not nearly as good as it appears.
  • After accounting for increasing store maturity, I suspect that Oliver’s transaction #s are flat or only growing slightly
  • I got sent a post on Hotcopper which spooked me a bit. I couldn’t verify some of that (indeed some of those employees still appear to be employed by Oliver’s), however the company did not respond when I emailed them.
  • Concerned above company social media responses (see below)


A lot of that is anecdotal evidence, but if you add the anecdotal evidence together with the concrete stuff (price increases) I think that uncertainty around Oliver’s has increased significantly. I think that with prices still increasing, Oliver’s risks damaging their compact with customers in return for a boost to short term results.

There are also these images which suggested I should be concerned over the quality of some of the company’s staff:


Sorry Rhyanon, your facts aren’t correct mate.  Get your shit together.

And here we have Anthony, clearly a cretin who goes out of his way to tell pork pies on Oliver’s social media:

Sooo yeah it would be fair to say I have some concerns about the quality of Oliver’s staff, by which I mean the muppet responding to these reviews should be dragged out by his fucking ankles.

I mean, if you’re going to respond to customer reviews, you just can’t call them liars and imply that they should fuck off! At the very least, if the customers are wrong, they could be politely rebutted by quoting the menu prices.  E.g. instead of “fuck off” Oliver’s could say  “our menu prices show that that should cost $18, maybe there was a mistake on your receipt,  we’d encourage you to return to the store for a refund.”  etc.

There are other examples of good customer service, for example one employee comments on many posts to apologise and will often leave a phone number if the customer wants to call and complain. I do like that, however, when you’ve seen 20-30 reviews in the last few months all complaining of tired food and the response is always “I’m so sorry you deserve better” it starts to wear a bit thin. There were similar responses mid last year when I was first investigating Oliver’s too, and this anecdotally speaks to me of a business that hasn’t made changes (e.g. to freshen up the food) in response to customer concerns.

So yes, I’ve sold Oliver’s. However I recently saw an interesting negotiating tactic that suggested asking a potential partner “what would it take for you to go all in on this deal?” and I thought that would be a useful question to apply here. I do like Oliver’s, so what would it take for me to return to the company?

  • Either a new CEO or a new strategy (current strategy appears to be to roll out stores, am not sure if there is much of an internal focus on quality, staff morale, speed of service, etc)
  • Raise capital (Oliver’s hasn’t got the funds to invest in a better supply chain, for example)
  • Gut the menu and drastically simplify it (I think fresher food could be more easily delivered if it were standardised).
  • Consider if it is better to push more of the food production process out to the stores themselves (to allow for better freshness and adaptation to customer demand)
  • Determine ways in which the speed of service in the restaurants could be improved. Complaints of slowness may not reflect a wider problem, but Oliver’s does need to develop a reputation for speed, quality, and consistency if it’s to take off.
  • Get the quality and the sourcing process right.  Consider sacrificing the organic label if necessary.
  • Sharpen up social media
  • Comprehensively address (from the bottom-up, not top down) customer complaints of food freshness, cleanliness, sullen staff etc (these may not be issues, but they do need to be addressed)
  • Cut the books from the stores or at least make certain they earn their keep. I feel that they do add atmosphere to the Oliver’s brand, but there needs to be a commercial or lowest-common-denominator (e.g. simple, agenda-free, healthy food information for everybody) aspect to them. They also tie up $$ if they are not productive.
  • Abandon the full year guidance, I doubt that it will be met anyway, and consider really focusing on the operations of the business to build a good culture moving forwards. Currently I feel like Oliver’s is run according to Oliver’s vision of a healthy utopia, rather than a lowest common denominator vision of making fresh food available to everyone at the right price with good service. Which is quite a difference.
  • Cut head office and unnecessary costs. It looks as though Oliver’s may have to settle on staying smaller for a longer until it works the kinks out. That would mean it needs to cut costs productively in order to boost its cash flow and stay solvent. (Oliver’s is currently OCF positive, but it may need to invest further in staff, supply chain, etc, which could increase costs).


I don’t need to see all of those things implemented to return, but I think they’re important. I need to see proactivity, as well as either more effort or evidence of success on these fronts before returning.

You will notice that I haven’t listed ‘cheaper price’ as a possible enticement. That is because I think – and I said this in my original thesis – if Oliver’s cannot get the business proposition right, it doesn’t have a great future.

On 28 February 2018 I sold all of my 2300 Oliver’s shares at $0.235, receiving $525.55 after brokerage, for a profit of $4.60 (lol) which reflects around a 0.8% profit on the position and an immaterial impact on portfolio performance.

I have no financial interest in any company mentioned. I previously owned shares of Oliver’s but have sold them all. This is a disclosure and not a recommendation.

Sell #5: Sold Crowd Mobile

I’ve sold my stake in Crowd Mobile (ASX:CM8). The thesis broke. I wrote this piece prior to the half year result, so info from the half year was not factored into my sale decision.

Originally Crowd was priced at 5x-ish cash flow and I figured they’d have debt paid down in a ~year. Given the company’s initiatives I thought revenue would stay approximately flat and earnings roughly similar. Even if earnings declined somewhat I thought Crowd would still build company value at a reasonable rate (5x cash flow = 20% FCF yield) over the next few years.

Then there was a company-sponsored advertising spree where, if I recall correctly, Crowd advertised on Hotcopper and appeared in a few promotional websites with favourable coverage. The CEO and the company both retweeted my original buy thesis and shared it on LinkedIn. Shares went from 14 cents to 24 cents and I didn’t sell (a process error on my part).  Then the CEO sold a bunch of shares at 18 cents midway through 1H18 (September last year). From my perspective it looks as though the company pumped its share price.

My opinion is that by this point it would already have become apparent that Crowd’s first half results were weakening. I have put a little mental mark next to the CEO’s name as a result of that stunt.

According to the February confessional, revenue this half declined modestly (~5%) but EBITDA halved. Shares tanked. The thesis is broken and I’ve completely lost faith in Crowd after it pumped the stock and then the CEO sold shares in advance of a weak result. Also given the decline in EBITDA I suspect that a some of the revenue may be in the form of receivables, which had already started to blow out in the full year results last year.  I don’t think Crowd will get paid for all of its accrued revenue.

The company’s still priced at about 5x cash flow and arguably maybe I should have stuck with it, but I’ve lost faith and I chose to sell.

(Edit: The recent half year results confirm that Crowd’s priced at around 6x cash flow. The results don’t look that bad – maybe it’s a potential buy for someone at these levels, but I’m out and I won’t be back).

And to the two people that warned me about it – yeah, you were right.  I’m supposed to know better.

On 13/02/2018 I sold all of my 3450 Crowd Mobile shares at $0.078, receiving $254.15, or a loss of $261.05 on my purchase price. This is a loss of 50.6% of the investment, or 2.6% of capital.

I have no position in Crowd Mobile. This is a disclosure and not a recommendation.