BioVittora has big plans for natural sweetener, despite investors' earlier snub.
Of all the investment opportunities that went begging during the financial crisis, natural ingredient-maker BioVittoria might be the one that everyone regrets letting get away.
BioVittoria withdrew its initial public offering based on its patented natural fruit-based zero-calorie sweetener, Fruit-Sweetness, in the face of market indifference in December 2009.
At
that time, six years since its founding, the company had established control of its fruit supply and processing at its factory in Guilin, southeast China. All it needed was United States Food and Drug Administration approval to begin marketing Fruit-Sweetness to the US$50 billion ($65 billion) sweetener market.
But, in the midst of the crisis, investors spurned BioVittoria. Investors be damned: the next month, January last year, the FDA granted the company regulatory clearance to sell the sweetener.
Today, chief executive David Thorrold expects that within the year "we'll have product on the shelves from the big food and beverage companies that have our ingredient". He says product development using a new ingredient typically takes 18 months to two years and the company is on target to have cereal and soft drink infused with Fruit-Sweetness.
"That is the real test: to have our ingredient in products that consumers love and it flies off the shelf - that's the ultimate goal," he says.
"In the medium term, there's an opportunity to grow the business to at least US$100 million."
He is not ruling out giving investors another crack at the company. "It could be building marketing capability, brand building or investment in the supply chain," he says of future funding needs. "But we're adequately funded at the moment."
The company raised $12 million in October and recently another rights issue yielded $1 million. That leaves Wellington-based Endeavour Capital as the largest shareholder, with founders Garth Smith, Andrew Rubman, Stephen Lefebvre and Fusheng Lan retaining significant holdings, followed by the usual investment suspects: New Zealand Venture Investment Fund, ACC and Stephen Tindall's K1W1 fund.
Fruit-Sweetness, with its fruit-based credentials, has a natural edge in public preference and Thorrold says its light colour and clean taste will win over companies keen to promote healthy food and drinks with reduced sugar content.
The fruit source, monk fruit, has been used for hundreds of years as a sweetener, flavouring and in traditional medicine. But the traditional method involved air-drying for the dried fruit market and there was no quality control over the active ingredient, which in its pure form is 300 times sweeter than sugar.
The traditional powder was dark brown and strongly flavoured, unsuitable for commercial application in food and beverages.
"We have this competitive insulation," says Thorrold. "We are the largest producer and processor of monk fruit in the world and that allows us to have a position in the market that is unique."
Monk fruit has long been seen as a potential goldmine - Procter & Gamble acquired a patent in 1994 for development - but to exploit its potential, a supply chain and production system had to be developed from scratch.
BioVittoria developed the plant varieties to produce high yields of the active ingredient, a supply chain of 5000 growers in the Guangxi province and a $7 million state-of-the-art processing facility in Guilin.
It has New Zealand patents on the production process and the product, owns plant variety rights and is in the process of acquiring US and European Union patent protection. The Chinese Government has granted Chinese subsidiary Guilin BioGFS "Dragon Head" status, officially recognising its market-leading credentials.
BioVittoria's success in forging its Chinese relationships is because of the personal friendship between founders Garth Smith and Fusheng Lan, who met 25 years ago when Lan came to New Zealand on an academic exchange.
Thorrold says Lan has strong connections in Guangxi province, which Smith now also calls home. Their partnership is "what brought everything together so that it became a very effective team".
Surely Lan and the Chinese could have achieved this without New Zealand help? "They could have done it themselves," Thorrold says, "but what we brought, and isn't typically found in a Chinese company, is the understanding of the market requirements for this sort of ingredient in the US.
"When we produced this clean-tasting powder, the response from the Chinese producers was, 'No one is going to want this; it doesn't taste like monk fruit'. That's the whole point ... it should taste like sugar."
There is also a better cultural fit between New Zealand and China, Thorrold says, as "we present in a different way to a big multinational" from the US. Now is the time to press home that advantage.
Contact Nick Smith at nicolas.absmith@xtra.co.nz
