Infant product manufacturer, Wattle Health Australia Limited (ASX: WHA), are set to significantly expand their domestic and international distribution channels, following the news that the company has signed a long-term agreement with Chemist Warehouse to sell their organic range of baby products.
The agreement would see the drugstore network which comprises of over 300 Australian stores to sell both their organic ‘Little Innocents’ skincare and ‘Uganic’ formula products, an impressive milestone for the company who only launched the formula earlier this year. Additionally, Wattle Health’s products will be made available to purchase online via Tmall, a subsidiary of Alibaba, opening up the potential for global consumers. Under the deal, Chemist Warehouse will receive equity in Wattle Health in exchange for supporting the small cap in various marketing activities.
Wattle Health’s CEO and Co-Founder, Lazarus Karasavvidis, commented on the agreement “It’s an important addition to Wattle Health’s vertical integrated supply chain which extends from securing supply of Australian certified organic fresh milk through to a dedicated organic drying facility, and the proposed majority owned blending and packing plant all the way to the end consumer.” Chairman and Co-Founder of Chemist Warehouse, Jack Gance stated “Chemist Warehouse is committed to bringing the best brands and value to our customers. Increasingly, consumers around the world show a preference for products, particularly infant formula, that are certified organic and produced to the highest standards, especially from Australia.”
China in particular have shown a large interest in Australian manufactured infant formula over the past couple of years, following the 2008 formula scandal that saw six infants die and 300,000 ill. The increased demand in specialised formula types have seen supermarkets take extreme measures including limiting purchase quantities and locking up formula. As such, it is hardly surprising that is has been reported that the infant formula market size is anticipated to be worth over US$100B, from an estimated US$45.12B last year (Fortune Business Insights, 2019).
The agreement between the companies is subject to Wattle Health finalising the acquisition of Blend and Pack, receiving the appropriate shareholder approval, and receiving at least A$62m, via a rights issue by the end of the year. The company has not traded since September this year following an extension of a voluntary suspension from the ASX. The company will be holding an extraordinary AGM on 16 December to seek shareholder approval for the acquisition, at which time it is expected to re-commence trading shortly after.