‘Free-from’ sales by UK supermarkets last year were £4.2 billion, according to figures from the industry’s bible, The Grocer, compiled by data firm Worldpanel.
That term, ‘free-from’, if you’ve never heard of it, refers (but is not limited) to food lines such as dairy-free and gluten-free.
On some metrics, this segment is set to grow to £15billion to £20billion over the next five years as the aisles of the local superstore reflect the growing demand for health-focused products.
However, more conservatively, it should exceed £6 billion, based on The Grocer’s numbers and current rates of expansion.
Okay, so why am I making this point? Well, we’re going to talk about an unheralded AIM-listed company that’s operating in the sector, with a category-killer product line also targeting opportunities in the broader health and wellness market.
Tooru crept into investors’ consciousness a month ago when it expanded its presence in Tesco stores for its challenger brand, OAF.
Tooru crept into investors’ consciousness a month ago when it expanded its presence in Tesco stores for its challenger brand, OAF.
Shoppers can now choose from eight different lines of the gluten-free bread, developed by Juvela, one of Tooru’s food businesses.
Its proposition is simple (actually ‘stupidly simple’, the marketing says): OAF is a ‘gluten free brand that doesn’t feel like a punishment’.
Okay, now, let’s back up a little to understand what Tooru is and what it does.
Put simply, it is the big top canvas for three operations: the aforementioned Juvela, Pulsin, which develops protein and fibre nutritional products, and Market Rocket, a digital partner agency.
Juvela, founded roughly 25 years ago, has carved out a firm position in the UK’s gluten-free market.
Its South Wales bakery supplies a wide range of specialist products, and the company is the clear leader in the pharmacy channel, where reliability and consistency matter.
More recently, it has pushed beyond its traditional base, launching an expanded ‘free-from’ range aimed squarely at mainstream retail.
As mentioned, Tesco has already taken the new products, and Tooru has flagged that two other major multiples are ready to follow suit.
The refreshed, retail-focused brand marks an important step in Juvela’s shift from niche supplier to broader player in a fast-growing category.
If Juvela is an unalloyed growth story, Pulsin offers more of a reset-and-turnaround angle. The brand has heritage and credibility, having been one of the earliest wellness bar makers two decades ago, but it has not always converted that head start into consistent momentum.
The current strategy is about sharpening its proposition, improving execution and reclaiming ground in a crowded market. Its strong presence in Holland & Barrett gives it a platform many rivals would envy, but the task now is to modernise the range, refresh the brand and rebuild velocity.
Within the basket there is also a small brand called Purely, which makes plantain-based snacks. ‘It’s small, but we believe in that product,’ says CEO Scott Livingston.
And then there’s Market Rocket, a digital marketing agency specialising in helping e-commerce brands grow, particularly on platforms like Amazon and TikTok.
Now, if Tooru were a direct-to-consumer business, having a company like Market Rocket in the portfolio would make perfect sense. However, the model is B2B, which makes the business look something of an outlier.
So, that’s the business. Very interesting, and with a large addressable market.
Keen followers of the story will have spotted an anomaly at this point.
The company’s valuation, around £4 million, reflects none of this potential. In fact, it doesn’t come anywhere close to encapsulating what’s happening in the here and now.
As CEO Livingston wryly observes, the company’s inventory of ingredients probably exceeds Tooru’s current market capitalisation.
The valuation gap is put into perspective when you delve into the financials. Last financial year, the businesses under the Tooru umbrella generated sales just shy of £14 million and EBITDA (underlying earnings) of £1.6 million.
The half-year update from the businesses revealed they are performing on a par with 2024. In other words, nothing catastrophic has occurred. Financially, it is debt-free, though with a credit line if required, and had £1 million on the balance sheet at the last reporting date.
Now let’s put all of that into context with some back-of-the-envelope maths.
If you take last year’s EBITDA and apply a very conservative food sector multiple of 5 to 8 times, the business should be worth £8 to £13 million.
This ignores two facts. In Juvela, and the OAF brand, Tooru is in one of the fastest-growing food segments. For this sort of business, EBITDA multiples of 10 to 15 are not uncommon.
At the same time, Pulsin’s turnaround is starting to gain traction, which should also underpin growth going forward.
How you value a business of Tooru’s type is art rather than science. However, it’s fair to say the market has done its maths wrong.
Livingston blames a cocktail of issues for the disconnect: sparse share trading liquidity, a relatively low profile with investors and a lack of understanding of the opportunity among London’s market makers, the traders that set prices for stocks.
And this is something the CEO and his team will be addressing in the new year.
While it may be a problem for current investors and management, the lowly share price does present an opportunity for those persuaded by Benjamin Graham’s investment blueprint. For Tooru, based on the numbers above, is the classic value stock.
Now for the cautionaries. I can only tell the story as presented, through conversations with management and my own background research. Readers should always conduct their own due diligence.
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