Nutri Pharma readies for new marketing strategy
strategy designed to eliminate risk relating to reliance on
marketing partners for its intellectual property.
The Norwegian firm, which generates all of its revenue through licensing out its patented soy combinations, has seen revenue slide by 55 per cent over 2003 to NOK4.98 million, after royalty revenues continued previous years' trends of falling well below targets.
A 51-per cent owned multi-level marketing business, scheduled to start operating this spring in eastern Europe and Russia, is the firm's final attempt to turnaround its fortunes.
Around 100,000 distributors will sell the firm's Nutrilett, low-calorie diet plan, currently seeing good sales growth in the Nordic countries through marketing by Collett Pharma.
"This is a huge and rapidly developing market and we also had the unique opportunity to join up with a business partner who had an already established network and was looking for products to distribute," development director Mike Clenshaw told NutraIngredients.com.
"We needed to get more involved in the value chain ourselves. We can no longer rely on partners," he added.
The company's licence agreement with leading UK baker Allied Bakeries for a cholesterol-lowering bread, started in January 2004, has generated disappointing income, with retail distribution of the product 'significantly below forecast', according to the firm.
Nutri Pharma has also been hit by poor performance of Scan Diet, a weight management product marketed by US retailer GNC, which suffered from heavy competition with Atkins and a relaunch of the SlimFast brand.
GNC said in December it will terminate the deal and alternative distribution channels for the product in the US have not been found.
Nutri Pharma has been looking for a new strategy to turn the business around for some time. Options included a sale, or a strategic alliance with another company.
However, challenges to its intellectual property may have damaged potential alliances.
The firm said this week that it had won a patent case against brought by Solae in 2001 but this can be appealed, and it is also facing a new challenge from the leading soy proteins supplier on a second patent.
"Last year when we were looking for an industrial partner this issue definitely hindered that process," said Clenshaw. "People were not sure how to evaluate the patents."
Retail sales of Nutrilett have doubled during fiscal 2004, and sales to wholesalers are up 29 per cent, suggesting that the product could do well in new markets.
Nutri Pharma will also have to invest in manufacturing however, and establish regulatory approval for the product in new markets.
In a results statement last week it warned shareholders that "while the return potential could be very attractive, this is a new venture with high risk".
