The owner of e-commerce brand Discount Dragon is plotting a significant scaling up of its surplus fmcg goods operations to take advantage of booming demand for cheaper branded goods.

AIM-listed Huddled Group, which acquired Discount Dragon in October 2023 and Food Circle Supermarket, has said it could add further acquisitions to its e-commerce-focused portfolio to further build its push into surplus food and fmcg goods.

“We think the potential for this market is huge,” said CEO Martin Higginson. “We are at the ceiling of our current warehousing capabilities and so can see the organic growth potential here. We are very confident it is a sizable and very scalable sector.”

The company has signed a deal to move to a new 54,000 sq ft warehouse within the next eight to 12 weeks that, Higginson said, will enable it to operate 365 days a year and “start scaling the business to its true potential”.

“Every time we have stress-tested demand we have been flooded with orders,” he said.

“So we know stock is available, we know customer demand is there, and now we’ve got to sort the middle bit out, which is the fulfilment and warehousing.”

He said the business continued to largely source surplus goods from intermediaries and third party sellers, but it was beginning to develop relationships with brand owners to provide a route to ethically recirculate waste products.

Issuing annual results this week, the group said Discount Dragon had continued to grow post-acquisition.

It has seen revenues of £1.6m from mid-October to the end of December, while Q4 2023 revenue increased by 37.3% to £1.8m versus £1.3m in the third quarter.

Meanwhile its recent Food Circle Supermarket acquisition, which it has rebranded as Nutricircle, is benefiting from more cash to buy stock, leading to a “sharp” increase in revenues in recent weeks.

Higginson said there was potential for further acquisitions to bolt on to create a nationwide online player in the food surplus space.

“Organically there are lots of growth opportunities, but there are also regional players that are starved of balance sheet firepower to buy stock,” he said.

“If we can go in and work with them in partnership or acquisition, and provide the cash for them to buy stock and the marketing and infrastructure expertise that will allow them to scale it, there is definite potential there.”

He said the cost of living crisis had given a tailwind to demand for surplus goods, but stressed the business can target a broad demographic as demand for low-cost branded goods was widespread.

“We’ve been selling craft gins at heavily discounted prices and we are literally selling out within hours,” he said. “I don’t care where people sit on the demographic scale, everybody loves a bargain.”

The group pushed into e-commerce after selling its Immotion and Uvisan businesses last year, changing its name from Let’s Explore Group on the acquisition of Discount Dragon owner Huddled for £3.95m.