Goat's milk infant formula market now worth $105m, Nuchev eyes potential ASX float
A company making solid inroads in Australia and China with a goat's milk infant formula brand called Oli6 is weighing up a potential initial public offering to help fund growth, after building a strong presence on the shelves of big pharmacy chains like Chemist Warehouse.
Nuchev's major shareholder and chief executive, Ben Dingle, has a strong track record after earlier in his career co-founding New Zealand's Synlait Milk, which is now a $1.4 billion company and a supplier to sharemarket darling A2 Milk.
Shares in A2 Milk have more than doubled since June to beyond $7, while ASX-listed infant formula maker Bellamy's Australia has jumped from $6.30 in mid-July to $11.40.
Bellamy's upgraded its profit forecast last week as it continued a roller-coaster ride for shareholders.
Mr Dingle said on Tuesday that Nuchev had pursued a deliberate strategy of expanding in pharmacy chains first, because that delivered important credibility to very knowledgeable mothers in China who researched extensively online.
"For any brand, it's important that you are successful in your home market," Mr Dingle said.
Growing gangbusters
The company generates about half of its sales in Australia and half in China. It is stocked in about 1000 different pharmacy outlets in Australia, including
Chemist Warehouse and Terry White Chemmart, and also just entered the independent supermarket sector through some IGAs.
Mr Dingle said the total goat's milk infant formula market in Australia was worth $105 million annually, from about $3 million just four years ago. "We've got a category that's growing absolute gangbusters," he said, adding that goat's milk formula had secured about 10 per cent of the total infant formula market in Australia, with nutrients found in goat's milk shown to help gut health and digestion.
Goat's milk is estimated to hold about 5 per cent of the overall infant formula market in China.
The company is privately owned, but a year ago a board of five directors was appointed chaired by Justin Breheny, a former IAG and ANZ executive.
Mr Dingle said the company was examining a range of options to fuel its next leg of growth. "We're looking at all options, and certainly an IPO is on the table." He declined to detail specific revenue figures, but said "we're budgeting for strong growth".
Supply capacity
The company has a herd of 6000 breeding goats in Victoria and is in the process of securing planning approvals to establish a processing plant and other infrastructure to step up supply. "We've got the capacity to increase supply very quickly in response to demand," Mr Dingle said.
Nuchev sources ingredients from Europe and has a long-term manufacturing agreement with certified manufacturer Nature One Dairy in Victoria. The Oli6 product has China Inspection Quarantine certification and sells into nine Chinese provinces. The brand is also going through the process to gain separate registration under new regulations being brought in by Chinese authorities from January 1, 2018 under the China Food and Drug Administration.
But delivering strong growth in its Australian business is equally important. Mr Dingle said dairy and infant formula brands needed a point of difference, and Oli6 had that through the nutritional benefits of goat's milk, just as A2 Milk had prospered through milk containing only the A2 protein.
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