Vital Farms (VITL) risk factors, FY2024 10-K

Other

1. 01Summary of Selected Risks Associated with Our Business
2. 02Failure to introduce successful new products, successfully enter new product categories or successfully pursue growth by other means may adversely affect our ability to continue to grow
3. 03If we fail to effectively maintain relationships within our existing farm network or further expand our farm network, or if our plans for the purchase, development and potential sale of accelerator farms do not result in the benefits we anticipate, our business, operating results and brand reputation could be harmed
4. 04Increased transportation and freight costs or failure by our transportation providers to pick up raw materials or deliver our products on time, in compliance with applicable governmental regulations or at all, have adversely impacted and are expected to continue to adversely impact our operating results
5. 05We currently have a limited number of third-party co-manufacturers and cold storage providers. The loss of one or more of our co-manufacturers or cold storage providers or our failure to timely identify and establish new relationships could harm our business and impede our growth
6. 06A limited number of distributors represent a substantial portion of our sales, and disruptions affecting our significant distributors or our relationships with such distributors may adversely affect our results of operations
7. 07We source substantially all of our shell egg cartons from a sole source supplier, and any disruptions may impact our ability to sell our eggs
8. 08Packaging costs are volatile, have recently increased and may continue to increase, which may negatively impact our profitability, and reduced availability of packaging supplies may otherwise impact our business
9. 09Our operations are subject to FDA and USDA federal regulations, as well as other federal, state and local regulations, and there is no assurance that we will be in compliance with all applicable regulations
10. 10Our status as a public benefit corporation and a Certified B Corporation may not result in the benefits we anticipate, and we may be unable to maintain our Certified B Corporation status

Risks Related to Our Growth and Capital Requirements

1. 11Our recent, rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may not be able to effectively manage our growth or evaluate our future prospects. If we fail to effectively manage our growth or evaluate our future prospects, our business could be adversely affected
2. 12maintain quality control over our product offerings
3. 13We may not be able to maintain or increase our profitability in the future
4. 14Sales of shell eggs constitute the vast majority of our net revenue, and a reduction in these sales would have an adverse effect on our financial condition
5. 15Failure to introduce successful new products, successfully enter into new product categories or successfully pursue growth by other means may adversely affect our ability to continue to grow
6. 16We estimate market opportunity and forecast market growth that may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all
7. 17We may require additional financing to achieve our goals, and the failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce or terminate our product manufacturing and development, and other operations
8. 18capacity. We believe that we will continue to expend substantial resources for the foreseeable future as we consider additional markets we may choose to pursue and other growth opportunities
9. 19The agreements governing our credit facility require us to meet certain covenants, which could restrict our operational and financial flexibility

Risks Related to Our Business, Our Brand, Our Products and Our Industry

1. 20If we fail to effectively expand our processing, manufacturing and production capacity as we continue to grow and scale our business, or if our forecasts of future supply capacity or customer and consumer demand are inaccurate, our business and operating results could be harmed
2. 21who have previously purchased our products may buy other brands and our retail customers may allocate shelf space to other brands, each of which could adversely affect our business, financial condition and results of operations
3. 22A substantial amount of our shell egg processing occurs at our existing Egg Central Station processing facility in Missouri. Any damage or disruption at this facility may harm our business
4. 23We also sell a small percentage of our shell eggs to wholesalers and egg breaking plants at commodity shell egg prices, which fluctuate widely and are outside our control. Small increases in production or small decreases in demand can have a large adverse effect on the prices at which these eggs are sold
5. 24Our business activities are subject to a variety of agricultural risks, including pests and diseases such as HPAI, and egg drop syndrome, or EDS, the occurrence of which can materially and adversely affect the quality and quantity of products, including shell eggs, that we distribute
6. 25Fluctuations in commodity prices and in the availability of feed grains could negatively impact our results of operations and financial condition
7. 26Increased transportation and freight costs or failure by our transportation providers to pick up raw materials or deliver our products on time, in compliance with applicable governmental regulations or at all, have adversely impact and are expected to continue to adversely impact our operating results
8. 27Our future business, results of operations and financial condition may be adversely affected by reduced or limited availability of eggs, cream for our butter and other raw materials that meet our standards
9. 28Failure to leverage our brand value propositions to compete against private-label products, especially during an economic downturn, may adversely affect our profitability
10. 29We are dependent on hatcheries and pullet farms to supply our network of family farms with laying hens. Any disruption in that supply chain could materially and adversely affect our business, financial condition or results of operations
11. 30Elevated interest rates could adversely affect our business and the ability of our family farmers to access capital
12. 31Consolidation of retail customers or the loss of a significant retail customer could negatively impact our sales and profitability
13. 32Our brand and reputation may be diminished due to real or perceived quality or food safety issues with our products, which could have an adverse effect on our business, reputation, operating results and financial condition
14. 33We must expend resources to maintain consumer awareness of our brand, build brand loyalty and generate interest in our products. Our marketing strategies and channels will evolve, and our programs may or may not be successful
15. 34If we fail to develop and maintain our brand, our business could suffer
16. 35If we fail to cost-effectively attract new consumers or retain our existing consumers, our business could be adversely affected
17. 36Our sales and profits are dependent upon our ability to expand existing customer relationships and acquire new customers
18. 37Our net revenue and earnings may fluctuate as a result of price actions, promotional activities and chargebacks
19. 38If we fail to retain and motivate members of our management team or other key crew members or fail to attract, train, develop and retain additional qualified crew members to support our operations, our business and future growth prospects may be harmed
20. 39If we cannot maintain our company culture or focus on our purpose as we grow, our business and competitive position may be harmed
21. 40Our operations are geographically consolidated. A major tornado or other natural disaster within the regions in which we operate could seriously disrupt our entire business
22. 41Our inability to maintain our GFSI and SQF Select Site certifications may negatively affect our reputation

Risks Related to Socioeconomic, Political and Environmental Factors

1. 42Disruptions in the worldwide economy may adversely affect our business, results of operations and financial condition
2. 43Disruptions in international trade, including disruptions due to global health pandemics, third-party labor disputes or geopolitical tensions, may have a material adverse impact on us, our suppliers and our network of farms, including our ability to expand our operations as planned
3. 44Climate change, or legal, regulatory or market efforts to address climate change, may negatively affect our business and operations

Risks Related to Legal and Government Regulation

1. 45Food safety and food-borne illness incidents or advertising or product mislabeling may materially and adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings
2. 46Our operations are subject to FDA and USDA federal regulations, as well as other state and local regulations, and there is no assurance that we will be in compliance with all applicable regulations
3. 47Changes in existing laws or regulations, or the adoption of new laws or regulations may increase our costs and otherwise adversely affect our business, results of operations and financial condition
4. 48Failure by our network of family farms, suppliers of raw materials or co-manufacturers to comply with food safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products and adversely affect our business
5. 49We are subject to stringent environmental regulation and potentially subject to environmental litigation, proceedings and investigations
6. 50Legal claims, government investigations or other regulatory enforcement actions could subject us to civil and criminal penalties
7. 51Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business
8. 52be subject to increased challenges by class action plaintiffs. Our inability or failure to obtain consent for these practices could result in adverse consequences, including class action litigation and mass arbitration demands
9. 53Our compliance with these legal requirements and obligations, together with any policies or practices that we have or may implement to further secure and protect sensitive data, could limit our ability to utilize data that may be valuable to our business

Risks Related to Our Status as a Certified B Corporation and Public Benefit Corporation

1. 54Our status as a public benefit corporation and a Certified B Corporation may not result in the benefits that we anticipate, and we may be unable to maintain our Certified B Corporation status
2. 55As a public benefit corporation, our directors’ fiduciary duty to balance a variety of interests may result in actions that do not maximize stockholder value
3. 56As a public benefit corporation, we may be subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interests, the occurrence of which may have an adverse impact on our financial condition and results of operations

Risks Related to Being a Public Company

1. 57Effective as of December 29, 2024, we are a large accelerated filer, which has increased and will continue to increase our costs and demands on management
2. 58the requirement that we hold a non-binding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved

Risks Related to Cybersecurity, Information Technology and Intellectual Property

1. 59The implementation of a new enterprise resource planning system could cause disruption to our business, and we may not be able to effectively realize the benefits of this new system
2. 60The loss of any registered trademark or other intellectual property could enable other companies to compete more effectively with us

Risks Related to Ownership of Our Common Stock and Other General Risks

1. 61Our stock price may be volatile, and the value of our common stock may decline
2. 62The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including those described elsewhere in this “Risk Factors” section
3. 63Sales of our common stock in the public market could cause the market price of our common stock to decline
4. 64We may be subject to significant liability that is not covered by insurance
5. 65Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock
6. 66provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum