Zacks Small Cap Analysis – SWSSF: Benefitting From Rising Demand for Decaffeinated Espresso & Pure Drinks, Initiating Protection – Cyber Tech

By M. Marin

OTC:SWSSF | TSX:SWP.TO

READ THE FULL SWSSF RESEARCH REPORT

Rising Consumption of ‘Decaf’ and Firm’s Pure Decaffeination Course of Essential Progress Drivers…

British Columbia-based Swiss Water Decaffeinated Espresso Inc. (OTC:SWSSF) (TSX:SWP.TO) is a number one specialty espresso firm and premium inexperienced espresso decaffeinator centered on producing chemical-free decaffeinated espresso. The corporate’s proprietary Swiss Water® Course of is a chemical-free espresso decaffeination course of that’s licensed natural by the Natural Crop Enchancment Affiliation.

Swiss Water Course of 100% pure…

The corporate is poised to profit from a number of components, we consider, together with rising consumption of decaffeinated espresso and the rising shopper pattern in direction of pure and extra healthful meals and drinks (F&B), as Swiss Water’s proprietary decaffeination course of is 100% chemical-free. The corporate additionally makes use of recent water from British Columbia’s coastal mountains. Importantly, on the identical time, the method is designed to keep up the complete taste of the inexperienced espresso beans. In a report available on the market for decaffeinated espresso, U.C. Davis notes that the Swiss Water methodology consists of the advantage of taste retention.

Because the decaffeinated section grows, we anticipate ongoing development for Swiss Water reflecting a number of traits mentioned under, together with:

▪ Rising shopper traits in direction of more healthy meals and beverage decisions

▪ Grassroots and different initiatives to shift to pure decaffeination course of

▪ Rising decaffeination decisions within the premium espresso section

▪ Shoppers managing caffeine consumption whereas sustaining espresso consumption

… Assembly rising demand: manufacturing facility improve, growth…

To improve and broaden manufacturing capability, Swiss Water opened a brand new state-of-the-art manufacturing facility within the metropolis of Delta, British Columbia in 2020 and, reflecting rising demand and the necessity to enhance capability, put in a second manufacturing line within the facility in 2023. The consolidation of operations in a single location has enabled Swiss Water to acquire some manufacturing efficiencies. As well as, the proximity of the ability to its warehouse operations additionally has led to some operational advantages.

Swiss Water, Decaffeinated Espresso Key Markets

We consider the corporate’s development technique has a optimistic tailwind from espresso consumption traits in key markets: North America and Europe. For instance, at the moment solely roughly 15% of espresso consumed within the U.S. is decaffeinated, and decaffeinated espresso represents about 12% of all cups consumed in Western Europe, in keeping with the NCA, however decaffeinated espresso is gaining market share. We consider this suggests substantial development prospects for Swiss Water, as gross sales of decaffeinated espresso is predicted to proceed to extend.

The U.S. doesn’t rank #1 primarily based on per capita espresso consumption, however it’s the largest marketplace for espresso consumption on this planet, in keeping with knowledge from World Inhabitants Assessment, reflecting the dimensions of the inhabitants mixed with per capita espresso consumption traits. On a per capita foundation, all however one of many high ten espresso consumption markets are in Europe, implying – we consider – sturdy alternatives for decaffeinated espresso consumption.

Given the consumption of espresso in North America and in lots of European markets on a per capita foundation, we consider there are alternatives for Swiss Water if, as we consider possible, decaffeinated espresso continues gaining share and as shoppers more and more deal with consuming pure and natural meals and drinks.

Regulatory & grassroots pushback to the usage of chemical compounds within the decaffeination course of

We consider that rising consciousness about the usage of solvents in some espresso decaffeination processes, mixed with rising curiosity in consuming pure meals and drinks, could possibly be possible development drivers for Swiss Water’s pure decaffeination course of. In reality, total international capability seems to be shifting towards much less chemical solvent primarily based strategies, reflecting shoppers’ rising well being preferences. In response to a research from U.C. Davis, “Solvent-based strategies are nonetheless probably the most prevalent methodology on account of their low value and ease of use. [However,] Swiss water decaffeination is growing in recognition…”

Furthermore, there have been regulatory and grassroots efforts to restrict the usage of chemical compounds within the decaffeination course of. In March 2024, California thought of a proposal to ban decaffeinated espresso utilizing methylene chloride or to require that espresso be labeled as such for improved shopper transparency. As well as, the FDA has been petitioned to ban 4 poisonous chemical compounds in meals makes use of, together with in lots of decaffeination processes.

Rising pattern in direction of wholesome meals and beverage (F&B), premium espresso decisions, growth of decaffeinated espresso class possible development drivers for Swiss Water

The decaffeinated section is gaining share throughout the total espresso class, as indicated. In response to shopper analysis from StudyLogic, the quantity of decaffeinated espresso consumed has grown yearly since 2017 in each the U.S. and Western Europe. On the identical time, the rising pattern amongst shoppers throughout the globe to hunt out wholesome meals and beverage (F&B) decisions, mixed with the continuing growth of the decaffeinated espresso class, presents potential development alternatives for Swiss Water, in our view. The corporate believes that its pure decaffeinated course of is a crucial issue that differentiates the Swiss Water course of and makes the corporate more and more related and in demand throughout the decaffeinated espresso class.

The pattern towards more healthy and pure F&B will be seen within the espresso decisions shoppers make, a pattern that can be in line with the rising recognition of natural and pure meals choices. Demand for natural espresso continues to rise. In reality, 39% of shoppers point out that they’re extra more likely to buy espresso that’s licensed natural, and 59% usually tend to buy espresso whether it is grown in an environmentally sustainable approach. In response to Espresso Intelligence, the 2021 international natural market was valued at $133 billion, which represented a 24.6% year-over-year advance. Demand for natural espresso is highest in North America, adopted by Germany and France.

Elevated deal with pure and premium decaf class assist drive development

On the identical time, decaffeinated espresso continues to play a task within the rising ‘specialty espresso’ class, which provides shoppers extra decisions throughout the premium espresso section. A rising deal with specialty decaffeinated espresso – or premiumization – is a crucial issue contributing to the growth of the decaf class and Swiss Water’s strategic focus is basically on the premium specialty espresso section. A latest NCA research signifies that 41% of U.S. shoppers responded that that they had loved a specialty espresso “prior to now day.” In our view, these traits bode effectively for Swiss Water Decaffeinated Espresso’s continued development.

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