TIDMCHLL
RNS Number : 1794L
Chill Brands Group PLC
12 May 2022
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12 May 2022
Chill Brands Group plc
("Chill Brands" or the "Company")
Business Update
(London, UK, 12 May 2022) Chill Brands, the international
consumer packaged goods company, is pleased to provide an update on
its status and business strategy ahead of its General Meeting at
10:00am on 12 May 2022.
Highlights
-- Online traffic to Chill.com increased following sustained organic growth.
-- Company engaged in comprehensive audit to optimise
effectiveness of website and digital marketing activities.
-- Work underway to further commercialise Chill.com domain by
establishing a selective online marketplace for premium lifestyle
and functional products.
-- End of Ox Distributing 'master distributor' status and
establishment of direct distribution model.
Fundraising Activity
As announced on 26 April 2022 (the "Fundraising Announcement"),
the Company has conditionally raised GBP3,500,000 (before expenses)
subject to the passing of the resolutions proposed at a General
Meeting of the Company's shareholders to be held today, 12 May 2022
at 10:00 am.
The fundraising consists of two parts in the amounts set out in
the Fundraising Announcement. The first part is by means of a
Subscription for new ordinary shares of 1 pence each ("Ordinary
Shares"), and the second part is by means of convertible loan notes
("Loan Notes") which will automatically convert into Ordinary
Shares on the publication of an approved Prospectus or any change
of regulation resulting in the publication of the Prospectus not
being required. Both the Ordinary Shares and the Loan Notes are at
a price of 2 pence.
On 9 May 2022, the Company announced a proposed Open Offer
("Open Offer") to provide shareholders with the opportunity to
invest in the Company on equivalent terms to the Fundraising.
Ordinary Shares and Loan Notes with an aggregate value of up to
approximately GBP484,000 will be available under the Open Offer.
The Company aims to circulate the necessary documentation for the
Open Offer to shareholders before the end of the month, again
subject to the passing of the resolutions at the General Meeting
and will make a further announcement when it does so.
Digital Sales Channel Update
In Chill Brands' January 2022 Interim Financial Report (the
"Interim Report"), the Company announced that it would be focusing
its efforts on digital growth with a view to capitalising on the
Chill.com domain.
Subject to shareholders approving all resolutions at the
upcoming General Meeting, a portion of the funds riased will be
used to invest in digital activities. This will include settling
the outstanding balance due of $800,000 (circa GBP650,000) for the
purchase of the Chill.com domain, an amount that was reflected as
part of the accrued liabilities in the Interim Report Balance
Sheet. Once the remaining balance has been settled, the Company
will have paid a total of $1,600,000 for the Chill.com domain.
Following settlement of this outstanding liability, the Company
intends to engage with brokers and other industry professionals to
fully and thoroughly appraise the value of the Chill.com domain.
This exercise will be complex due to the intangible nature of the
domain, however the Company intends to provide an update as soon as
it is practicable to do so.
Current Status of Online Operations
Aside from purchasing the Chill.com domain, the Company has yet
to make a significant financial investment in its online
activities. Despite this, its online operations have enjoyed
organic growth. Chill.com now welcomes more than 10,000 unique
visitors each month, with monthly online store sessions having
increased by 34% during the past 90 days.
The site has now served customers in all 50 US states and
individual orders made via Chill.com are typically higher than
comparable sales in retail stores. The average online customer
spends $44.31 per visit, while returning customers currently
account for almost 30% of all orders placed on the site
demonstrating an improved retention rate as compared to previous
periods.
Digital Strategy
With minimal financial investment, Chill Brands has already seen
incremental growth of its digital sales channel. The Company will
continue to build on this foundation with targeted spending and is
undertaking a comprehensive site audit to identify opportunities to
improve click-through and conversion rates.
The Company will also prioritise Search Engine Optimisation
(SEO), User Experience (UX), and email marketing strategies with a
view to attracting and retaining relevant customers who are
interested in its CBD wellness and tobacco alternative products. It
is believed that these activities will not only improve the sales
performance of the website at large, but also of the Chill
subscription portal with the aim of delivering predictable
recurring revenue.
Following the 2021 UK launch of the Chill brand, work has now
commenced to onboard the Company's UK-facing website (currently
hosted on thechillwayuk.com) to Chill.com. This will allow the
Company to provide UK consumers with a comparable experience to
those shopping in the US while maintaining a brand identity that is
appropriate for the local market.
Marketplace Model
In addition to sales of its own products, Chill Brands intends
to establish Chill.com as a premier online destination for highly
differentiated lifestyle and functional products.
The Company is actively engaging with external partners in the
US regarding the listing of synergistic, non-competing products on
Chill.com. It will adopt a highly selective approach to all brand
partnerships and intends to onboard products with strong
demographic and SEO correlations to complement its existing
range.
It is hoped that this project will drive additional traffic to
Chill.com while creating a new route to revenue generation. Further
updates will follow as discussions progress.
Retail Sales Channel Update
In its January Interim Report, the Company also announced that
it would not continue to follow the rollout timeline set out in
2021. This decision was made on the basis that such rapid scaling
would require high levels of capital expenditure with no guarantee
of a timely return. It was also determined that the Company was not
adequately resourced for widespread store activations as high
levels of ongoing investment and significant internal sales and
marketing infrastructure would be required to commence and maintain
operations across thousands of stores.
To date, the Company has operated a retail distribution model
utilising Ox Distributing LLC ("Ox") as its 'master distributor'.
This meant that all sales into bricks and mortar retail stores were
first made to Ox who would then sell to sub-distributors that would
ultimately pass products into convenience store chains. The
complexities of this distribution model have prevented the Company
from fully controlling its sales channels and gathering
business-critical data. This, combined with logistical and supply
challenges along with general disruption to the convenience store
environment during the pandemic, has prompted the Company to
reassess its approach to retail distribution.
Establishment of Direct Distribution Model
During the past few weeks, Chill Brands dispatched personnel to
conduct site visits of existing national retail partners. The
visits generated valuable insights that highlight past mistakes and
future opportunities.
To refine its retail distribution model, the Company and Ox have
mutually agreed to terminate the latter's 'master distributor'
status. This will allow the Company to sell directly into the
physical retail channel without the involvement of multiple
distribution agents. In concert with this new strategy, the Company
will initially apply its direct support model to a core group of
individual convenience stores and specialist outlets in Colorado
and the surrounding states where it will aim to develop reportable
sales data and a consistent product sell-through rate. Ox and the
Schrader family remain engaged and highly supportive of Chill
Brands as evidenced by their involvement in the fundraising
activity announced by the Company on 26 April 2022. This transition
has not resulted in any change to the funds due to be received from
Ox under the Promissory Note referenced in the Company's
announcement on 15 March 2022.
As part of this simplified model, the Company will concentrate
on building closer ties with retail partners by equipping them with
the marketing collateral, product knowledge, and on-demand sales
support needed to establish the Chill brand as a leader within
targeted areas and demographics. In connection with its wider
digital strategy, the Company will also seek to provide a more
convenient and cost-effective way for store operators to order
Chill products. Work has already commenced on a sophisticated
wholesale order portal and the Company intends to launch a trade
customer subscription service to ensure high-performing stores
benefit from a continuous and expedient supply of Chill
products.
Eric Schrader, Non-Executive Director, commented: "Having
supported the Company as its master distributor, the Ox team and I
are now pleased to transition into a new working relationship that
will facilitate future growth and success for the Chill Brand.
After launching into a difficult retail environment and enduring
the COVID-19 pandemic, we are excited to continue this journey as
we work to put Chill firmly on the map."
Callum Sommerton, Chill Brands' Chief Executive Officer, said:
"The past year has been exceptionally challenging for Chill Brands
and its shareholders, but it is important for us to look forward to
the opportunities ahead.
The Company benefits from a highly differentiated brand, premium
quality products, and access to broad sales channels both online
and via retail stores. It is time for us to capitalise on those
advantages and we intend to do so through consistent execution of
our digital and retail sales strategies.
I am grateful to Ox and the Schrader family for their support of
Chill and look forward to working with them to deliver value for
all shareholders."
About Chill Brands Group
Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an
international company focused on the development, production, and
distribution of best-in-class hemp-derived CBD products, tobacco
alternatives and other consumer packaged goods (CPG) products. The
Company operates primarily in the US, where its products are
distributed online and via some of the nation's most recognizable
convenience retail outlets. The Group's strategy is anchored around
lifestyle marketing that is designed to enhance the popularity of
its products, channelling visitors to its landmark chill.com
website.
Publication on website
A copy of this announcement is also available on the Company's
website at http://www.chillbrandsgroup.com
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