Genufood Energy Enzyme Corp. (OTCBB: GFOO), an exporter and distributor of nutraceutical enzyme products, recently announced a new two-year $20 million equity purchase agreement with Southridge LLC. The agreement provides the funding necessary to support the company’s commercialization strategy. In this article, we’ll take a look at this commercialization strategy and why investors in the $140 billion global nutraceutical market may want to take a closer look.
Growing Market for Enzymes
The global enzymes portion of the global nutraceutical market is expected to grow at a 6.8% compound annual growth rate (“CAGR”) to reach $8 billion in size by 2015, according to the Freedonia Group. With many Asian economies growing at a rapid clip, many analysts expect the fastest growth to come from this region, which is approaching North America in size. In fact, the Asia-Pacific region is expected to have the second-largest nutraceutical market share by 2017.
With many chronic, hereditary diseases and functional imbalances caused by deficiency of certain enzymes, Genufood Energy Enzyme Corp. fills a key void within this market with products that are produced from natural fruit and vegetable extracts and available to target a wide number of conditions (see Figure 1). The company’s focus on the Asia-Pacific region could also drive more significant growth than many U.S. players in the market.
According to the company’s S-1 filing with the SEC, it began marketing and exporting a limited number of products in Taiwan in September 2010 and in Singapore and Sri Lanka in June 2011. Management plans to expand on these sales by appointing a Country Sole Distributor in Taiwan, China, Hong Kong, Macau, Singapore, Malaysia, Thailand and Sri Lanka in order to distribute its enzyme products for human consumption, animal consumption, and special outlets.
With new funding in place, Genufood Energy Enzyme Corp. plans to develop a new packing and bottling plant in Singapore and repacking plant in Sri Lanka in order to lower its cost of sales and enhance its profitability and market share over the coming years. While the company has reported minimal revenues to date, key agreements are already in place with manufacturers of its enzyme products and sufficient cash resources are available to begin operations.
On July 14, 2013, the company also opened its first of ten planned retail locations, in the Suntec City Mall in Singapore. The move into direct retail complements its existing distribution networks and is designed to create brand awareness of its ProCellax and ProAnilax enzyme supplements in the large and growing market. Management plans to fully roll out its commercialization strategy within the next nine months, according to its S-1 SEC filing.
In its second quarter 10-Q filing, management also already reported early signs of success with its new business model, with revenues that grew from $0 to $107,686 year over year. These results didn’t include the impact of its new retail locations quite yet, but investors have an idea of the possibilities and healthy gross margins of 46.3% could be further improved. As of July 19, 2013, the firm also reported more than $1.1 million in cash, putting it on stable footing.
Potential Investment Opportunity
Investors in the nutraceutical space, including companies like USANA Health Sciences Inc. (NYSE: USNA) or Nutraceutical International Corp. (NASDAQ: NUTR), may want to take a closer look at this emerging company. Genufood Enzyme Corp. has raised the capital that it needs to execute on its commercialization strategy over the next nine months, while the equity commitments represent a strong vote of confidence in its management team.
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