Road to Profitability, page-28

Hi Sammy,

While there were occasional spots in local Australian TV (iirc), the advertising strategy so far has been very focused on social media. The advertising spend on their social media strategy has recently increased, and as announced, an intensified campaign is on the way.

With regards to a broader TV campaign, there are several things to consider.

a) Cost. It has simply not been in the budget to start a national TV campaign - so far. I linked an article once that quoted around US $4 million as the cost for the average national TV campaign in the States; if I recall correctly. I don't know any figures for Australia.

b) Market expansion. I believe that a TV campaign in a market like Australia is currently not the best option. Thinking about China, it is known that Western products succeed when the brand has been established abroad. I would think that evolis is already on its way to becoming a well-established brand in Australia. However, in the US a lot of groundwork still has to be done. Therefore, I believe that a TV campaign in the US could be an option once potential demand can be met. I also believe that a TV campaign only makes sense once distribution in the new markets (China, Europe, India) has reached a level where those markets also somewhat profit from a broader campaign in the current primary markets USA, Japan, and Oceania.

c) Supply. In order to make a broad TV campaign worthwhile, product supply should be a given so that an increased demand can be met once the TV campaign is live. While evolis has started selling in the US, it is not yet available in all those stores that will be targeted soon (as per the recent investor presentations and the capital raising). A TV campaign only makes sense once people can basically walk into any beauty store or pharmacy and purchase the product over the counter. With that in mind, production needs to be ramped up, too.

I understand the raising as a means to increase the marketing spend and to increase product manufacture to cater for expected distribution deals - ULTA and Sephora are certainly the two that we are all waiting for. Once the distribution network provides sufficient supply for the demand expected, marketing spend could further increase along with growing profits, and thus a TV campaign will make sense then.

Of course, management might decide to run a TV campaign earlier at their discretion, but I hope that they have a good feel for the expected demand and the timing before making this kind of decision.