PHLI bullish despite slipping into the red

Related tags Accelerade Marketing

A slower-than-expected roll-out and previous year results swollen
by a licensing fee from GSK pushed PacificHealth Labs into the red
in the second quarter, but the future still looks decidedly rosy.

PacificHealth Laboratories Incorporated (PHLI), the company behind the Accelerade and Endurox energy drinks, has reported a slide in both sales and profits for the second quarter of the year but said it remained optimistic about its prospects for future growth.

Sales for the quarter slipped to $1.8 million from $3.9 million a year earlier, while losses of $44,526 compared to profits of $1.5 million in 2001. For the first half of the year, sales were $2.98 million compared to $4.5 million a year earlier, while profits of $981,519 in 2001 became losses of $295,850 in 2002.

The reason for the company's optimism is principally due to the fact the decline in revenues and profits was due to exceptional income from a licensing agreement with GlaxoSmithKline and significant sales of the its Satietrol natural appetite control product following widespread publicity which was not repeated in 2002.

A truer reflection of the company's performance can be seen in the performance of Endurox and Accelerade, sports and recovery drinks. Combined sales of these products grew 29 per cent during the quarter and 55 per cent for the half, and the appointment of a broker to push sales of these products into the mainstream food retail sector should help these figures grow even higher in the second half of the year.

In addition, a ready-to-drink version of Accelerade is currently under development, and test marketing of the product should begin in the fourth quarter, the company said.

PHLI's licensing agreement with GSK for its Satrietrol product is also expected to give a further boost to profits in the future, if the drugs giant decides to continue with the agreement. GSK will make further payments to PHLI as it begins to market the product through mass-market distribution channels, but it will only decide whether to continue with the agreement in the third quarter of 2002.

Dr. Robert Portman, president and CEO of PacificHealth Laboratories​, said: "We continue to see strong growth in our sports drink line, especially Accelerade. Distribution still is the key. Most of our major retailers and distributors have seen on average a 137 per cent increase in sports drinks sales versus the first six months of last year. However, we have not expanded our distribution as rapidly as we anticipated.

"In the current economic climate, major retailers have become more cautious in bringing in new products. In the last month, we've added a major drug chain, the leading outdoor retailer, and Accelerade is currently being evaluated in one of the country's largest sporting goods chains. We've also brought on board a national broker force to expand distribution of Accelerade in food, drug and mass retailers. We are confident that we will achieve the distribution necessary to support our marketing efforts."

He continued: "Awareness of Accelerade, especially among the more serious athletes, continues to increase. Much of our marketing efforts are focused on the larger team sports such as soccer, basketball, and hockey. In the past six months, we have received official drink status from leading coaching organisations as well as sports camps"

Expanding distribution of the drinks to the mass market is only part of the plan, though. Portman said that ongoing research into Accelerade was expected to unveil additional benefits when compared to traditional sports drinks, and with consumers increasingly relying on science when choosing what product to drink, this could be a major advantage for the brand.

Dr. Portman concluded: "The management at PHLI continues to be optimistic about our growth this year and our accomplishments over the past six months which have laid the foundation for growth in 2003 and beyond. However, the company has adjusted earnings estimates downward on a fully diluted basis to be in the range of $0.02 to $0.20 per share for 2002 accounting for the fact that distribution has been somewhat slower than anticipated."

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