It's all about China, folks. Never mind that the economic growth in the Middle Kingdom is slowing, and President Trump has fired the first shots in what could be a damaging trade war. China is still a BIG market. News that the Food Revolution Group (ASX code FOD) juicing company had signed a deal with an online distributor to supply products it hasn't even made yet was enough to push FOD shares up 50 per cent in a week.
What has fired up the shares is the news that the FOD has struck a deal with Health More to develop a range of "exciting and innovative beverage products" for the Chinese market. Health More already markets brands such as A2, and Blackmores into China via the internet, and is Australia's largest company in this e-commerce game. The new FOD products will be developed based on e-commerce data showing what is trendy and what is selling best to online customers.
It's the classic marketing strategy – find out what your customers actually want before you make it, instead of trying to sell what you have already produced. The shares soared despite the fact that the official announcement to the stock exchange last week gave no details about the terms of the agreement. It said nothing about any conditions attached to the deal, the costs, the duration or the hoped-for level of sales.
This lack of detail, and the jump in the share price, has prompted the Punter to sell half the FOD shares he bought less than a month ago, pocketing $1,240, of which $330 (36 per cent) is a quick profit.
Wattle Health (WHA) has also been rising nicely on news of potential Chinese sales. On Thursday last week it announced that it had received approval for general trade in China of its Australian Natural Baby Food Range. The Punter is showing a 40 per cent profit on his WHA shares.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.