BioVittoria depends on new food launches

BioVittoria depends on new food launches for growth

by Pattrick Smellie

Nov 10 (BusinessWire) - BioVittoria Ltd's patented PureLo sweetener will only grow as fast as the food and beverage industry launches new products, the company's prospectus for its $20 million New Zealand sharemarket float makes clear.

While PureLo is touted as a credible contender for a slice of the global sweeteners market, estimated to be worth US$50 billion annually, the prospectus says the higher cost of PureLo means it will never compete on price with sugar, which it is capable of replacing.

PureLo is 150 times sweeter than sugar and made from the juice of the Chinese luo han melon fruit, whose productivity has been enhanced by New Zealand and Chinese scientists, based on Kiwi technology that allowed kiwifruit plantings to boom from the 1980's.

The resulting powder is able to be described as "natural" and "zero-calorie" under US Food and Drug Administration regulations. The product is already a legal food in the US and is applying for upgraded status that should improve its likelihood of attracting manufacturer interest.

However, PureLo's cost would add around US5 cents to a standard bottle of carbonated soda drink.

"The company does not expect to see adoption of this ingredient for mass-market products such as sodas in the near term," says the prospectus, which describes BioVittoria as a high risk investment despite having patented plants, systems and manufacturing plant in place. "Because of the difference in cost, and the need to communicate the ingredient benefit to the consumer, BioVittoria is expecting that sales of PureLo will generally be driven by new product launches.

"This is reflected in the projected financial statements as a gradual build in revenues, as food and beverage companies are limited in the number of new products they can launch annually."

The company projects net, after tax losses above US$5 million for the 2010 and 2011 financial years, but producing a US$4.36 million profit by 2013, when sales are projected to be US$35.78 million, compared with US$4.38 million projected in the current financial year.

BioVittoria expects to producing 60 tonnes of PureLo at its new manufacturing facility in Guilin, a city in the southern Chinese province of Guangxi , with potential for 250 tonnes.

While the company's product is driven by bio-technology exploiting the desire for better nutrition, the prospectus reveals that BioVittoria's ambitions rest to a large extent on successfully creating a new consumer brand based on PureLo.

"As one ingredient in the global food industry, PureLo could become an undifferentiated component in the overall food product mix. BioVittoria believes the development of a comprehensive brand architecture and a compelling articulation of the benefits for consumers will allow PureLo to be recognised on-pack as a unique ingredient, and to be positioned at a premium to other sweeteners."

To back that effort, the prospectus reveals an impressive line-up of American, Chinese and New Zealand management talent, scientific and marketing expertise.

Joining the board after the float will be Christopher Sinclair, a retired chairman and chief executive of Pepsi-Cola Company with 30 years' experience in the highly competitive US food and beverages market, and advising the board is Danny Strickland, a former Chief Innovation and Technology Officer at The Coca-Cola Company. Its chairman, Bob Stringer, is an American venture capital fund founder with extensive governance and Australasian experience.

The chief executive of the Hamilton-based company, David Tharrold, has international management consultancy and accounting experience and is a New Zealander, as is Stephen LeFebvre, vice-president of sales and marketing for Asia-Pacific, who has a successful track record in nutraceutical and dietary supplement manufacturing and marketing. The new vice-president, sales and marketing, Paul Paslaski, was poached from a similar role at US-based Cargill Health, manufacturers of PureLo's only plant-based rival, Rebenia.

On the science side is Dr Garth Smith, a founding shareholder and former MAF/HortResearch scientist who began looking for the PureLo opportunity in China in 2003 and now lives in Guilin, where he works with Lan Fusheng, ceo and president of BioVittoria's key partner in China, BioGFS. Mr Lan is a highly decorated and connected scientist in China, recognised as "their national expert in luo han production".

The prospectus also makes it clear the forthcoming float, which must raise at least $8 million to proceed and is targeting no more than $20 million, is necessary for BioVittoria to continue trading.

"The validity of the going concern assumption on which the financial statements are prepared depends on the succesful conclusion of the proposed capital-raising, and the ongoing support of the banking institutions," the prospectus auditors, KPMG concluded.

The prospectus discloses that Biovittoria breached its banking convenants with the ANZ in the year to March 31, and continued to operate in breach pending a review by the bank "in early November".

"If the bank decided to withdraw its ongoing support then the Group may not be able to continue to operate as it would not be able to pay its creditors as they fall due," the document says.

(BusinessWire) 16:47:08

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