Pivot To Agri-Food Sector Pays Off For Sadot Group, Inc As Company Reports First Profitable Quarter In Q2 2023

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By Rachael Green, Benzinga

In November of last year, Sadot Group Inc (NASDAQ: SDOT) pivoted from being primarily a restaurant and food service brand to becoming a global agri-food supply chain operator, sourcing agricultural products from producing regions and delivering them to markets around the world.

Nine months later, it marked its ninth consecutive month of generating at least $45 million in monthly revenue. And in its second-quarter earnings released in August, it reported its first profitable quarter in its history, with quarterly revenue rising to $160 million.

How Sadot Group Pivoted From Food Service To Global Agri-Food Supply Chain

In November 2022, the company formerly known as Muscle Maker, Inc. formed Sadot LLC, marking the official strategic pivot into the global agri-foods supply chain sector. Since then, the companys focus has been on becoming a leader in providing sustainable solutions that address food security issues around the world.

By broadening our perspective, we seized the opportunity to venture into new markets and businesses within the global food industry. This move not only offers significant financial prospects but also generates social and environmental value," said Sadot Group Inc. CEO Michael Roper.

Its trading operations, housed under Sadot Agri-Foods, source food and feed products like soy, wheat and corn from key producing regions and deliver them to buyers across Central & South America, Asia, Africa and the Middle East. As this vertical grows, the company also plans to add logistics and transportation services as well as carbon monitoring and carbon credits.

Its farm operations, housed under Sadot Farm Operations, take it a step further and actually produce those major food crops along with high-value crops like mango and avocado at the companys farms in southern Africa.

At the end of August, it added over 4,900 acres of farmland in Zambia to its operations. The acquired farmland has the potential to harvest over 1,300 acres of corn, 775 acres of soybean, 270 acres of wheat, 180 acres of avocado and 50 acres of mango. Its first wheat harvest as Sadot-owned farmland is expected this month or early October.

While its trading and farm operations mark the biggest changes and the biggest drivers of the companys recent transition into profitability, Sadot Group hasnt completely abandoned the food service sector where it got its start.

Instead, the Company began a significant overhaul of its operations and structure to cut costs and improve revenue. That includes re-franchising the company-owned Pokmoto and Muscle Maker Grill locations, while exploring strategic options for Superfit Foods.

There are currently 34 Pokmoto locations, 10 company-owned units plus 24 franchises. For Muscle Maker Grill, there are 3 company-owned locations plus an additional 10 franchised locations.

The Company will focus on franchising its successful Pokmoto concept as a way to generate royalties from the brand while maintaining an asset-light business model with lower operating expenses. It has since sold 57 new franchise agreements that are expected to open in the near future.

These actions will allow us to strengthen our balance sheet and reallocate funds towards growing the agri-foods supply chain business, reinforcing our commitment to increasing shareholder value by

focusing on our path to profitability, market diversification, and a strengthened brand presence," said Roper.

The Multi-Million Dollar Success Of Sadot Groups Revamped Business Strategy

In the second quarter of 2022, before the formation of Sadot LLC, Muscle Maker Inc. reported a net loss of $1.8 million. One year later, Sadot Group completely flipped the script, reporting a net income of $190,000 for its second quarter of 2023.

While cutting operating costs and overhead has been key, that transition into profitability was largely driven by record revenue growth coming from the companys new trading and farming operations. Its quarterly earnings grew from $3 million in Q2 2022 to $160 million in Q2 2023, and nearly all of that came from its agri-food vertical which completed 21 transactions for the quarter, averaging $7.5 million each.

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