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Новости/Аналитика

Why the leader of the hemp market in Australia reoriented its business to the production of dietary supplements

12.03.2020

The strategy of one of the largest Australian companies, reorienting the entire business model of the enterprise to the manufacture and promotion of biologically active additives and cosmetic preparations based on hemp leaves and inflorescences or drug-free plant extracts, is interesting for careful study .

At the Australian hemp companies Elixinol Global Limited existed big ambitions at a time when it appeared on the Australian Securities Exchange (Australian Securities Exchange) in January 2018 to mobilize resources with a view to further development of the enterprise . At the time of entering the investment capital market , the company was offering a “sacred three line of hemp products ”:

cosmetic preparations and biologically active additives from the “green mass” of hemp or the above products using cannabidiol extract (CBD) - Elixinol trademark;

Hemp plant food is a trademark of Hemp Foods Australia;

- drugs based on the therapeutic properties of cannabis - a trademark of Nunyara.

After less than two years of active activity in the market, the company’s management announced that it is currently abandoning two of its three areas of activity and is focusing its efforts on creating and promoting biologically active additives and cosmetic preparations based on the “green mass” of hemp plant or product lines that include drug-free cannabinoids. To this end, the assets of Hemp Foods Australia were transferred to Nunyara, and the released resources were invested in dietary supplements , as well as cosmetics sold under the Elixinol brand name. 

The decision to abandon Hemp Foods Australia and invest all available funds in Elixinol was a combination of two factors - business efficiency and its market performance. In particular, the company's bet on the development of the medical field of hemp activity over two years did not work. There is no corresponding regulatory framework , therefore, despite the fact that the company was a pioneer of this market , it cannot realize its potential capabilities. On the other hand, the activities of a business unit that uses hemp seeds for food is extremely difficult in the Australian market, and even exporting products to the United States could not significantly affect economic performance. According to the management of the company, the main factor in the failure in this area is related to the fact that the market is flooded with a cheap low-quality product, which is objectively impossible to compete with. The above factors led to the fact that in 2019 the company's revenue ($ 27.2 million) from its activities decreased by 16% ($ 16.3 million) compared to the same period in 2018. 

The decision of the company’s management to concentrate on promoting the market of cosmetic products and dietary supplements based on the therapeutic properties of hemp or drug-free plant extracts was based on an audit of Elixinol Global Limited, as well as a careful study of market data obtained . 

Commentary experts of the Association "Ukrainian industrial hemp"

Nunyara was founded in 2014 to participate in the emerging Australian cannabis market . However, the uncertainty of the regulatory framework regarding the possibility of using hemp plants for medical purposes has led to the fact that the company still does not work. This is despite the fact that Nunyara applied for licenses for the cultivation and production of medical cannabis to the Office of Drug Control of Australia in early 2018 and received a license for the production of medical cannabis in July 2019, however, the license cultivation has not yet been received. 

Hemp Foods Australia was one of Australia's largest certified wholesalers , traders , manufacturers and exporters of organic hemp seed products and their derivatives ( protein , oil , broken seeds , flour , etc. ).

Elixinol is a global manufacturer and distributor of hemp and skin care products . The company is considered one of the most influential CBD brands in the world . Distributes manufactured products derived from hemp in 40 countries around the world , including North and South America , Europe , Asia and the Pacific. 

The problems of Elixinol Global Limited are simply refracted into the domestic market of our country . Before considering the possibility of investing in Ukrainian companies that position themselves as start-ups and plan to work in the medical cannabis market , ask whether there is an appropriate legal framework for this type of activity in our country. If a powerful Australian company at the forefront of these processes in its country curbs its activities due to bureaucratic procedures that its employees have not been able to overcome for several years, does it make sense to invest resources in the modern hemp breeding sector , which is generally not provided with legal base in Ukraine . 

Another example of an incorrect market assessment is the activity of Hemp Foods Australia. Underestimating the competition from companies that supply cheaper inorganic cannabis seeds to the market , the company was not able to compete with its organic products on the Australian market , and it did not save it from financial problems and established export deliveries to the most economically developed country in the world .

The strategy of one of the largest Australian companies, reorienting the entire business model of the enterprise to the manufacture and marketing of biologically active additives and cosmetic preparations based on hemp leaves and inflorescences or drug-free plant extracts, is at least interesting for careful study .

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