BioGaia sharpens US e-commerce strategy with distributor acquisition
03 Jan 2022 --- Sweden-based probiotics business BioGaia has signed an agreement to acquire all shares in Nutraceutics Corporation. The deal is being conducted through its US subsidiary, BioGaia Biologics Inc, and Nutraceutics holds all shares in Everidis – BioGaia’s exclusive US distributor.
The investment in Everidis, whose sales are primarily online, is part of BioGaia’s long-term strategy to invest in direct-to-consumer digital sales. The move also complements the company’s efforts in Finland, the UK and Sweden, initiated during 2021.
Isabelle Ducellier, CEO of BioGaia, tells NutritionInsight that expanding Everidis’ knowledge of online sales to non-US markets is one of the “main reasons” behind the acquisition.
“The e-commerce market for probiotics in the US is much more mature than in Europe,” she points out.
“Our strategy is to be available at every consumer touchpoint. The potential worldwide is very high, especially in a pandemic situation where people don’t have the full possibility to buy their probiotics in traditional point of sales, like pharmacies.”
Nutraceutics has no other businesses beyond Everidis.
A multi-million transaction
The shares will be acquired in two steps, with the first taking place last week. It acquired 80% of the shares through both an acquisition of shares and a new share issue for a consideration of US$9.7 million and US$5 million, respectively.
The transaction values Nutraceutics at US$13.9 million on a cash and debt-free basis, corresponding to 5.3 times expected operating profit 2021.
BioGaia will acquire the remaining 20% of the shares during either 2027 or 2028 (determined at BioGaia’s sole discretion) for an amount based on the net revenue for the year directly prior to the acquisition of the remaining shares.
The purchase price for the remaining shares is currently estimated, based on Everidis´ long-term sales plan, to be approximately US$22 million. Jennifer Cherry, Everidis´ current CEO, will remain company CEO, and no management changes are planned for the organization.
“Jennifer and Brett Cherry founded Nutraceutics and consider the company as their own baby. It was important for them to keep some shares, and it was important for BioGaia to keep the management team on board,” says Ducellier, explaining why the shares are being acquired in two steps.
Stateside growth
With a retail sales value of US$2 billion, BioGaia says the US is the number one probiotic market in the world with a good long-term potential for continued growth.
The company has been active there, having worked together with Everidis since 2007. It uses an omnichannel strategy in combination with marketing both to healthcare professionals and to end-consumers which has resulted in the US being BioGaia´s largest market in 2021.
“The US is the biggest probiotics market in the world volume-wise. It still has great potential to grow, as driven by consumer trends, e-commerce maturity, new indications where probiotics can make the difference and a favorable regulatory landscape giving probiotics the place they deserve to improve people’s health,” explains Ducellier.
Everidis has set the standard for the whole BioGaia group in terms of an omnichannel strategy.
Building trust within digital audiences
Illustrating e-commerce’s US maturity, Ducellier points to the popularity of services like Amazon Prime.
“When you have a colicky baby, you don’t want to take the car with a crying baby, to drive to the nearest pharmacy to buy your BioGaia drops. The young mother goes directly online and gets her drops delivered home two hours later,” she explains.
She adds that Everidis has helped build US pediatricians’ trust over the years by visiting healthcare professionals and medical congresses.
“Based on this brand recognition, we can now offer all our probiotics range to the US consumers both on and offline.”
Better investment opportunities
Ducellier believes that acquiring Nutraceutics will lead to better opportunities for investing quickly and more where relevant.
Nutraceutics and Everidis together have 23 employees and expected revenues of US$16.5 million for the full year 2021, of which approximately 87% are BioGaia branded products. It is expected to have an operating profit of US$2.6 million.
Through the support of BioGaia and since part of the acquisition is made through a share issue, Nutraceutics will have resources to intensify direct-to-consumer marketing efforts and still maintain a solid marketing program toward health care professionals.
BioGaia’s revenue and operating profit for 2021 would have been positively affected by approximately US$10 million and US$2.6 million, respectively, had Nutraceutics been a part of BioGaia during the entirety of 2021. The acquisition is financed from existing cash reserves.
Last April, BioGaia announced that it would be digitalizing its business model to adapt to consumers’ increasing online presence. Therefore, it has been focusing on strengthening its direct-to-consumer competence, with the ambition of building global consumer-friendly marketing based on science.
Other probiotics players have also been honing their digital focus, with Chr. Hansen growing its e-commerce channel. However, Probi was battling headwinds in July as a result of e-commerce customers losing momentum from 2020 to 2021.
By Katherine Durrell
