The probiotics market is changing fast. Consolidation of a fairly fragmented market is taking place and the major players are actively acquiring small probiotic companies with promising products. A number of new, major companies such as Kerry, ADM and Novozymes have entered the extremely hot probiotics market.
BioGaia has so far grown organically with great success. We are optimistic and believe we can continue to grow at a fast pace but we have also decided to try to participate in the ongoing consolidation in our own way. In order to improve our opportunities for a successful acquisition strategy, through a directed new share issue we invited in two very strong companies each of which can help to strengthen BioGaia in the prevailing new market situation.
Cargill, one of the largest private companies in the USA, is one of these companies with which we have been working for a while now to develop new products. EQT Public Value Fund is the second company. A highly reputed and very financially strong global investment organisation, EQT can contribute with both capital and skills related to acquisitions as well as an international and very knowledgeable contact network. As well as contributing with capital, Cargill can also provide considerable industrial knowhow. The new issue brought in approximately SEK 1.1 billion and puts us in a financial situation that permits significant acquisitions.
So, what are we looking for? We can consider acquisitions along the entire value chain – from manufacture to distribution – with the requirement that they provide better control, growth or profitability.
The extremely strong digitalisation trend that has been underway for some years gained enormous power in 2020, due to Covid-19. We have adapted to this megatrend in many markets. Especially in the really large ones such as China and the USA but also in countries such as South Korea and Vietnam. We plan to accelerate our own and our distributors’ expertise in selling directly to consumers. This is a very exciting development which may require us to make acquisitions to complement the skills we already have in this area. I am convinced that online retail and digitalisation offer significant potential for BioGaia’s existing and future products. With digitalisation, but also growing consumer interest in health products, BioGaia’s brand will become even more significant and we are now considerably strengthening our marketing capacity in terms of people and resources. BioGaia’s brand is global and has a better spread than all our competitors, large and small. The brand is an excellent tool in the fierce competition for consumer attention not just specifically from other probiotics companies but also from other companies in the health segment.
As announced in our press release, we have started a new business, BioGaia Invest, whose mission is to make minority investments in small companies that can support BioGaia’s sales growth. We have therefore invested in a diagnostics company which we believe will help us to grow in the bone health segment and in another company that works with the skin microbiome, where we see a number of opportunities for collaboration which can boost our growth rate over time. We are interested in increasing our investments in companies of this type with the aim of creating a favourable ecosystem for BioGaia with innovative and sustainable companies.
At our 2020 Annual General Meeting, two new Board members were elected, with skills within digitalisation and sustainability. These are important given how fast the new technology is developing and the demands that aware consumers are making on products and services.
BioGaia’s products have a very attractive profile since they make a strong contribution to global health (one of the UN’s global goals) and we continue to invest in research and development in order to solve health problems for people all over the world.
Peter Rothschild, Chairman of the board, BioGaia