Marr's delivery trucks

Marr : 2nd Interesting European Small Cap Stock

Symbol: MARR
Stock Exchange: Borsa Italiana, Milan

What's The Business?

Marr is a food distributor in Italy, with a market capitalization of about 1B Euros. It buys food from producers and resells it at a markup mostly to restaurants, but also to hotels, office catering and bars. They also produce some of their own brands of products, which are normally products that add value to products they buy, such as when they buy chicken breast and dice it into cubes and sell the cubes at a higher price. 

The majority of their sales are also delivered to the restaurant in trucks, trucks not owned by the company, and the drivers are not employees of Marr, the drivers are independent contractors paid to execute the delivery. The sales not through delivery are picked up from their facilities. They only operate in Italy, but have operations in practically all regions.

Marr's delivery trucks

Why The Company Looks Interesting

  • Dominant Market Share – Marr sell about 20% of the food sold to restaurants, bars, caterers and hotels in Italy. The nearest competitor’s sales in Italy account for a couple of per cent of total Italian sales. This is a huge gap, which is a big competitive advantage for Marr. The bigger you are as a company, the more you can spread your costs over more sales and therefore you can afford to give the best prices compared to competitors. Restaurants are price-sensitive, so they would rather go to a company like Marr. For this reason, Marr has been taking market share and should continue doing so.
  • Customers Are Small – In Italy, unlike many other countries, there is a big preference for these small one-man-show restaurants, rather than restaurant chains. Therefore, Marr’s customers are very small compared to what a similar company operating overseas would experience. It is more profitable to deal with smaller customers because they have no bargaining power. They just have to accept prices. However, if a big customer, like a restaurant chain, came to buy in bulk from Marr, they could negotiate a better price, meaning less profit for Marr.
  • Highly Recurring Revenue – Revenue from food sales is highly stable, we will need to buy food consistently for the rest of the time, even if there are innovations in the way the food is produced. It’s not like sales of something like cars, where we can hold off on buying new cars in times of economic hardship. The impact on revenue in the last few years has only been because of Covid since restaurants had to close. Once the economy is back to normal, we’d also expect sales to be back to normal.
  • A Great Logistics System – Service and reliability is very important for customers. Since Marr is so big, they have the strongest logistics network for timely and consistent delivery, which they can do better than competitors. For example, during Covid, many competitors cut down deliveries from daily to twice per week. Marr could keep consistent deliveries, which won them some market share.
  • A Strong Family Ownership – The Cremonini family own a bit more than 50% of the company. It’s a family well known within the food industry. The fact that they have such large ownership is positive for investors as they have the same incentives as investors, that is to make the company’s share price grow. 

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