Cellmid Ltd (ASX:CDY) is optimistic that its revenue growth will continue in the months ahead despite the COVID-19 related disruptions on the conduct of business.
Favourable global trends in the consumer sector are expected to provide strong tailwinds for the company to reach its sales objectives in the next 12-24 months.
"Exciting shift" in consumer behaviour
Chief executive officer and managing director Maria Halasz said: “Having built a resilient consumer business, we plan to fully capitalise on our existing distribution networks internationally, grow our direct online presence and tap into the strong consumer demand for premium functional haircare globally.
“We are at the beginning of an exciting shift in consumer behaviour towards predominantly online purchases, and this includes the older, Customer S generation (Gen X and older).”
Path of future growth
The company’s broad distribution network, together with its ongoing investment in digital infrastructure and e-commerce capabilities, allowed it to stabilise revenue throughout the second half of the financial year while setting the business on the path of future growth as everyone learns to live with the COVID-19 pandemic.
The pandemic, however, has provided further impetus to the already burgeoning e-commerce sector in consumer health, especially in the prestige haircare sector, which Cellmid occupies with its evolis® range of products.
Revenue up despite COVID-19 delays
Chairman David King noted that notwithstanding the COVID-19 disruptions, total revenue for the year in review increased, albeit marginally, over the 2019 financial year.
The consumer health revenue, by far the largest contributor to total revenue, was behind this increase despite a drop in the important Japanese component of revenue arising from interruptions to trading with China as well as reduced salon sales.
King added: “We remain confident that sales in and through Japan, including exciting new markets in Korea and Singapore, will return significant revenue growth in the year ahead.
“Together with the strong growth in the Australian and USA markets during FY20, there is good cause for optimism that overall revenue will continue to grow in the months ahead.”
Consumer health products
The expansion of its consumer health products distribution network continued at a pace throughout the year and has included new TV shopping opportunities, a range of international distribution agreements, and locally an important trading agreement with the Australia-wide API/ Priceline group.
Although the planned in-store rollout with Priceline was postponed due to COVID-19 disruption, this sales channel is expected to be an important component of future sales growth in Australia.
Internationally, the all-important import permits in the most significant markets, other than China, are already in place; and there are good reasons to be optimistic that a Chinese import permit for evolis® will be forthcoming in the not too distant future now that the requisite regulatory framework has been implemented.
While sales of skincare and make-up brands have been stagnant overall, functional haircare remains one of the strongest performers amongst premium cosmetics, according to The Beauty 2020-2030 Forecast.
Other winners of the shift in consumer behaviour in hair care are dry shampoos, hair masks and treatments; categories in which Cellmid has recently launched first in class or best in class products.
Hair-related google searches surged by 13% globally, driven by functional hair care, and the rise of Customer S (Silver, indicating Gen X and older) online is particularly important as they represent more than 50% of Cellmid’s customers by age
Penetrating China market
Cellmid has been actively engaging with current and potential partners in China to achieve optimum market penetration for its Jo-Ju®, Lexilis® and evolis® brands.
Whilst cross border e-commerce presents the most immediate opportunity, this is only a small portion of the addressable market for its hair loss and anti-ageing hair care products.
An online survey of 20-50-year-old Chinese customers indicated that hair loss is one of the top five health concerns for this age group, providing an enormous opportunity for brands that have been developed to tackle these needs.
With import permits to the US, Europe, UK and Japan, Cellmid's successful regulatory strategy has been the foundation of its global brand expansion for evolis®.
Halasz said: “We intend to continue our efforts in that regard in China, where, with the new Chinese cosmetics regulations (Cosmetic Supervision and Administration Regulation or CSAR), the path has become clearer for obtaining import permits for evolis®. Our Jo-Ju® and Lexilis® brands have import permits in China already with strong therapeutic hair loss claims.”
Talks with potential funding and research partners for its biotech business, Lyramid, are now starting to regain traction as the target capital and investment markets re-gather momentum after being inhibited by the widespread business interruptions during the early months of COVID-19.
The company has appointed Bart Wuurman, a highly accomplished and experienced biotech CEO, to lead the partnering/ investment initiatives while at the same time continuing to grow its intellectual property portfolio; and continuing its advanced research programmes through collaboration with its extensive network of international partners.
King believes its range of COVID-19 testing portfolio will find significant application in both diagnostic and pandemic management roles as the incidence and spread of the disease become better understood.
He noted that In the relatively short time of the COVID-19 pandemic, the landscape for COVID-related testing regimes has changed rapidly and repeatedly, presenting challenges in penetrating this market.
The diagnostics business remains a core asset for the company and during the year, the company had signed a series of supply, introducer and distribution agreements for a range of SARS-CoV-2 antibody and PCR diagnostic tests.