Kalve’s growth pillars and drivers behind
It has to be admitted that there is a global trend in the coffee segment which strongly supports ambitious growth strategy of Kalve. The global specialty coffee market is projected to grow at a compound annual growth rate of 10-13% from 2025 to 2030. This growth is largely driven by evolving consumer preferences and an increased awareness of high-quality and sustainable coffee products. The third-wave coffee movement, which emphasizes artisanal brewing techniques and unique coffee origins, has cultivated a culture of exploration and appreciation for coffee’s sensory qualities. The pandemic also played a role in accelerating the at-home coffee experience, as consumers sought to replicate café-quality beverages at home. This shift has driven sales of premium coffee beans and brewing equipment. Among demographic groups, individuals aged 25-39 years are particularly influential.
Kalve currently derives 55% of its turnover from B2C channels, including its own cafes and retail outlets. In following months, the company plans to open six additional cafes in Tallinn and Vilnius, with several lease agreements already signed. This move is expected to further increase the B2C share, catering to growing consumer demand for specialty coffee in the Baltic region. Recognizing the limits of growth within the Baltics, Kalve plans to expand into markets like Germany, Spain, and Finland starting from 2026. These regions are identified as emerging specialty coffee markets with rising consumer interest.
Besides, Kalve continues to develop e-commerce segment, which currently makes less than 5% of total sales, as its the easiest segment to scale. By Q2 2025, Kalve plans to launch a new e-commerce platform with a subscription service, creating opportunities for recurring revenue and customer loyalty.
Additional growth area is Private-label products, which are poised to become a significant revenue stream by 2026, having spare capacity and realizing high margin potential of this segment. It is quite clear that Kalve has the profile of the growth company, developing its business at high pace, where critical becomes management competence. Till now the company has been demonstrating rather decent growth figures delivering 63% sales growth annually during the period from 2018 to 2023 navigating through COVID related and high energy cost challenges. Also during the first half of 2024 earnings growth figures look well: sales +40%, margin at high 49% level and profit more than doubled. It should be noted that the company manages to deliver profitability even continuing to grow at fast pace during its heavy investment cycle.
Industry competition and major risks
Looking into coffee market’s playfield, in Latvia the major competitors are local roasters such as Rocket Bean and Andrito Coffee. Other coffee shops can be also mentioned here, however, they do not create direct competition due to specialty niche of Kalve. Though the competition is quite obvious, Kalve still is able to be price giver, not price taker. On the global scale the competition is tougher as the industry is more crowded, but in the next periods it’s not an issue until the company enters new market. However, we need to keep in mind large multinational corporations like Lavazza and JDE Peet’s are expanding their specialty coffee offerings, leveraging their scale and distribution networks.
Company’s major risks are associated with raw material supply. The coffee is being mainly sourced from one Brazil cooperative (76%), though the company is diversifying its sourcing expanding collaboration with other coffee growers. Raw coffee pricing is dependent on the global coffee prices which exposes company to net earnings volatility, though until now Kalve was able to pass the cost of coffee to the consumers. The biggest risk we see is the ability to successfully execute strategy, which might not be achieved given unfavorable external factors such as declining consumer purchasing power, intensifying market competition. Therefore, management talent and ability to navigate challenges is going to be critical.
Demanding Valuation
Kalve’s IPO sets valuation of the company at €7 million (€6.00 per share). When performing a comparative analysis, Kalve Coffee’s balance sheet shows that other publicly traded companies in the global coffee sector (Starbucks, JDE Peet’s, Dutch Bros, Luckin Coffee), currently Kalve has a higher ratio of leveraged funds. However, this dynamic is expected to shift as Kalve attracts new capital, resulting in a more favorable capital structure post-IPO. Currently, Kalve’s equity ratio is in line with the peer median and is projected to improve further after the IPO.
| KALVE | Peer group | |
| Debt/equity | 130% | 63% |
| Equity ratio | 33% | 34% |
| Equity ratio post-IPO | ~75% | – |
| Gross margin | 49% | 33% |
| EBITDA margin | 14% | 13% |
| EBIT margin | 11% | 10% |
Source: Kalve Coffee IPO Prospect, Alphinox, Reuters
One of Kalve Coffee’s standout features is its high gross margin, which demonstrates the company’s ability to create more value from its products and services compared to global industry leaders. However, gross margin advantage largely disappear considering EBIT margin, which is explained by overhead costs, which are relatively significant for Kalve due to its smaller scale. As the business grows, the fixed portion of Kalve’s expenses is expected to decline proportionately, which should enhance overall profitability and ultimately reward investors. Additionally, it should be noted there is commitment of the firm’s governing bodies to pay out 20% of profit as dividends.
| KALVE | Peer group | Baltic market (Nasdaq Baltic main list) | MSCI Europe | |
| P/SALES | 2.2 | 2.0 | 0.60 | 1.83 |
| P/EBITDA | 15.34 | 11.94 | 3.89 | 8.36 |
Source : Kalve Coffee IPO Prospect, Alphinox, Reuters
At the offered price of €6 per share, the valuation reflects an ambitious growth rate. Kalve’s price-to-sales (P/S) ratio as of September 30, 2024, stands at approximately 2.2, compared to the peer group average of 2.04. Similarly, its price-to-EBITDA (P/EBITDA) ratio is 15.3 versus the peer group’s 11.9. While Kalve’s high growth rates (exceeding 30%) make this valuation seem attractive, it also leaves limited room for execution errors. Crucial risks include scaling efficiently in new markets, maintaining operational margins while expanding, and achieving ambitious growth targets in a competitive and evolving market. Investors should also consider Baltic market risks, which historically result in a valuation discount compared to European peers. Despite these factors, the valuation appears fair, provided the company can meet its growth objectives. However, execution will be key, and failure to address these challenges could significantly impact the investment case.
Disclaimer: This opinion is for informational purposes only and is neither an offer nor a recommendation to enter into any type of transaction, to buy or sell securities or financial products in the broadest sense. The evaluation of Kalve’s initial public offering (IPO) is carried out independently. AS “Alphinox Quality” and its employees might participate in Kalve IPO. AS “Alphinox Quality” does not take responsibility for the consequences of using or not using the contents of the published opinion.
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