‘Resonated with investors’: CBD specialist Elixinol raises $11m, pledges branded products focus
The firm raised about AUD$5.3m (US$3.5m) and AUD$5.6m (US$3.7m) from its institutional entitlement offer and retail entitlement offer respectively. The capital raising drive ended on last Thursday (May 21).
The firm first announced its capital raising plan on May 5. The purpose is to support its operating cash flow, product distribution, and brand-building.
CEO Oliver Horn said in an ASX statement that he was pleased with the overall result.
“We are very pleased with the overall result of the capital raising. Our strategy of creating a global Elixinol branded CBD supplements business has clearly resonated with our existing shareholders and new investors.
“The roll out of our new Elixinol range is progressing well in the US and Europe and we are now looking forward to further implementing our branded consumer strategy whilst navigating the short-term COVID challenges,” said Horn who took over the helm just a month ago.
This development also comes after the firm's sale of Hemp Foods Australia failing through, as purchasing party, a subsidiary of Shanghai Shunho New Materials Technology had terminated the deal.
The termination was due to non-satisfaction of a condition in the share purchase agreement, with COVID-19 impacts cited as a reason.
Management change
The former CEO of Swisse Wellness ANZ and North America, Horn is the second CEO that Elixinol had appointed in less than a year, replacing Stratos Karousos who took on the job last July.
The firm’s founder, Paul Benhaim, who stepped down last December from his chief innovation officer post for ‘personal reasons’, has returned as the chairman of the board. He is also a non-executive director.
On another note, like Horn, Swisse’s other former high-ranking exec, George Livery, has also joined rival CBD firm Bod Australia as its non-executive director. Livery was Swisse’s director of strategy and corporate when he left the firm two years ago.
Strategies
Elixinol said it would now focus on branded products, reduce its reliance on bulk ingredient sales, and might even position itself as the homegrown CBD brand if regulations in Australia ease.
The strategies are in response to accelerating sales for its branded, co-branded products in the key markets of North America and Europe, and the declining sales from selling bulk ingredients.
Sales from its branded and co-branded products have been increasing yoy. In FY2019, the segment represented 59% of its total sales and 37% in FY2018.
In Q1 FY2020, they also represented about 82% of the firm’s total revenue, this is also because these products bring in higher margin.
In the US, it has decided to reduce its focus on lower margin bulk ingredient sales and private label businesses as sales from this segment had dropped 34% in FY2019.
The firm said this was due to the influx of cheap and poor quality product facilitated by the lack of product regulation.
In terms of new product development, it has introduced an immune booster product, which combines CBD with vitamin C, vitamin B6 and zinc. The new product comes in the form of capsules.
Other formats for its new branded products include tinctures and liposomes.
Japan
Elixinol Global also winded its business in Japan two months after it discovered its Japan subsidiary selling non-compliant hemp derived CBD products.
The non-compliance was related to the strict requirements in Japan on sourcing CBD from only hemp stalk and seed, according to the firm.
It has since sold 50.5% interest in Elixinol Japan to Takeshi Sakurada – who was one of the other shareholders – in last December.
At that point, the firm explained the decision was made as it moved to a licensing model for Japan and to focused on its key markets in North America and Europe.
