BioVittoria depends on new food brands for growth
BioVittoria depends on new food launches for growth
by Pattrick Smellie
Nov 10 (BusinessWire) - BioVittoria Ltd's patented PureLo sweetener will only grow as fast as the food and beverage industry launches new products, the company's prospectus for its $20 million New Zealand sharemarket float makes clear.
While PureLo is touted as a credible contender for a slice of the global sweeteners market, estimated to be worth US$50 billion annually, the prospectus says the higher cost of PureLo means it will never compete on price with sugar, which it is capable of replacing.
PureLo is 150 times sweeter
than sugar and made from the juice of the Chinese luo han
melon fruit, whose productivity has been enhanced by New
Zealand and Chinese scientists, based on Kiwi technology
that allowed kiwifruit plantings to boom from the 1980's.
The resulting powder is able to be described as
"natural" and "zero-calorie" under US Food and Drug
Administration regulations. The product is already a legal
food in the US and is applying for upgraded status that
should improve its likelihood of attracting manufacturer
interest.
However, PureLo's cost would add around
US5 cents to a standard bottle of carbonated soda drink.
"The company does not expect to see adoption of this
ingredient for mass-market products such as sodas in the
near term," says the prospectus, which describes BioVittoria
as a high risk investment despite having patented plants,
systems and manufacturing plant in place. "Because of the
difference in cost, and the need to communicate the
ingredient benefit to the consumer, BioVittoria is expecting
that sales of PureLo will generally be driven by new product
launches.
"This is reflected in the projected
financial statements as a gradual build in revenues, as food
and beverage companies are limited in the number of new
products they can launch annually."
The company
projects net, after tax losses above US$5 million for the
2010 and 2011 financial years, but producing a US$4.36
million profit by 2013, when sales are projected to be
US$35.78 million, compared with US$4.38 million projected in
the current financial year.
BioVittoria expects to
producing 60 tonnes of PureLo at its new manufacturing
facility in Guilin, a city in the southern Chinese province
of Guangxi , with potential for 250 tonnes.
While
the company's product is driven by bio-technology exploiting
the desire for better nutrition, the prospectus reveals that
BioVittoria's ambitions rest to a large extent on
successfully creating a new consumer brand based on
PureLo.
"As one ingredient in the global food
industry, PureLo could become an undifferentiated component
in the overall food product mix. BioVittoria believes the
development of a comprehensive brand architecture and a
compelling articulation of the benefits for consumers will
allow PureLo to be recognised on-pack as a unique
ingredient, and to be positioned at a premium to other
sweeteners."
To back that effort, the prospectus
reveals an impressive line-up of American, Chinese and New
Zealand management talent, scientific and marketing
expertise.
Joining the board after the float will be
Christopher Sinclair, a retired chairman and chief executive
of Pepsi-Cola Company with 30 years' experience in the
highly competitive US food and beverages market, and
advising the board is Danny Strickland, a former Chief
Innovation and Technology Officer at The Coca-Cola Company.
Its chairman, Bob Stringer, is an American venture capital
fund founder with extensive governance and Australasian
experience.
The chief executive of the
Hamilton-based company, David Tharrold, has international
management consultancy and accounting experience and is a
New Zealander, as is Stephen LeFebvre, vice-president of
sales and marketing for Asia-Pacific, who has a successful
track record in nutraceutical and dietary supplement
manufacturing and marketing. The new vice-president, sales
and marketing, Paul Paslaski, was poached from a similar
role at US-based Cargill Health, manufacturers of PureLo's
only plant-based rival, Rebenia.
On the science side
is Dr Garth Smith, a founding shareholder and former
MAF/HortResearch scientist who began looking for the PureLo
opportunity in China in 2003 and now lives in Guilin, where
he works with Lan Fusheng, ceo and president of
BioVittoria's key partner in China, BioGFS. Mr Lan is a
highly decorated and connected scientist in China,
recognised as "their national expert in luo han
production".
The prospectus also makes it clear the
forthcoming float, which must raise at least $8 million to
proceed and is targeting no more than $20 million, is
necessary for BioVittoria to continue trading.
"The
validity of the going concern assumption on which the
financial statements are prepared depends on the succesful
conclusion of the proposed capital-raising, and the ongoing
support of the banking institutions," the prospectus
auditors, KPMG concluded.
The prospectus discloses
that Biovittoria breached its banking convenants with the
ANZ in the year to March 31, and continued to operate in
breach pending a review by the bank "in early November".
"If the bank decided to withdraw its ongoing support
then the Group may not be able to continue to operate as it
would not be able to pay its creditors as they fall due,"
the document says.
(BusinessWire)