expanding into india

30 October SMH article

Sandalwood grower expands Indian market REBECCA LE MAY
October 30, 2009 - 7:04PM
AAP

A West Australian sandalwood grower is expanding into the Indian market where the fragrant plant has been all but denuded amid growing demand for its pharmaceutical powers.

TFS Corporation Ltd says sandalwood plays a major role in its Indian culture, religion and personal hygiene - opening up a ready market for the Emirates-backed company.

TFS says it has the world's largest sustainably grown plantation of Indian sandalwood, the sought-after variety named santalum album, at Kununurra in Western Australia's far north.

While native WA sandalwood, named santalum spicartum, has been exported from the state since the 1840s, it is a cheaper, inferior variety mainly used in incense and perfumes.

TFS also processes this species at its Mt Romance plant at Albany in WA's south.

With Indian sandalwood oil trading at more than $US1.7 million ($A1.85 million) a tonne on the legal spot market, TFS is throwing its efforts into its 2,500 hectare Indian sandalwood properties in the Kimberley region of WA.

It was oil from the santalum album species that TFS on Wednesday agreed to sell to Texas-based biotechnology firm ViroXis under a multi-million-dollar deal.

This was TFS' first commercial-scale contract with a pharmaceutical firm.

ViroXis will purchase up to three tonnes of the oil a year to develop a botanical drug for use as a topical treatment for viral skin infections including human papilloma virus, which can cause cervical cancer.

"If they are successful (in commercialising the drug) ... it opens up a very big supply market for us," TFS executive chairman Frank Wilson told AAP.

"There's real potential to this market."

Mr Wilson said Indian sandalwood was starting to be investigated by Western medicine after long use in Chinese herbal and Indian Ayurvedic medicine.

Sandalwood's many uses in personal hygiene, such as chewable mouth fresheners that are popular in India and Pakistan, represent a potentially huge market for TFS, he said.

Artificial sandalwood oils are used as a flavour and antiseptic in such products but cause mouth ulcers.

"Because of the dearth of natural sandalwood from suppliers in India, a lot of synthetic and other substitutes are used and there are significant adverse affects on people's health as a consequence," Mr Wilson said.

"The market for natural sandalwood in these products, a healthy product that they will love, is enormous.

"Probably the biggest single market for sandalwood oil in the world is in the mouth freshener market."

Mr Wilson said TFS was poised to penetrate the Indian market through a joint venture with Dubai-based Emirates Investment Group, which is privately owned by a member of the ruling family of Sharjah.

Mr Wilson said he expected TFS would attract other major Middle East investors as it moved away from managed investment schemes (MIS) so sullied by the high-profile collapses of Great Southern Ltd and Timbercorp.

"We're rapidly moving out of the MIS space," he said.

The tax effective schemes were appropriate for start-ups but had been over-relied upon by some agribusinesses, which had lost focus on what should have been their top priority - growing products.

"Great Southern and Timbercorp have caused enormous distress to a lot of people and they are an embarrassment to companies such as ourselves who can't help but be grouped with them.

"But our business model is entirely different.

"We use MIS as a means to an end. MIS has been a great way of building a good business.

"But fundamentally, our business is about growing sandalwood, processing it and producing oil and other by-products.

"We're not tarnished with the Great Southern stigma anywhere else in the world."