- McPherson’s has signed a joint venture agreement with ABM to jointly develop new brands for the Greater China market
- The partnership will also see the expanded sales of Dr LeWinn’s skincare branded products in Greater China
- The joint venture has the opportunity to be expanded until June 30 2022
- McPherson’s share price is up 9.60 per cent with share trading for $2.74 apiece
McPherson’s has signed a joint venture agreement with Access Brand Management (ABM) to jointly develop new brands for the Greater China market.
This partnership will also see ABM expand sales of Dr LeWinn’s branded products in Greater China.
This joint venture builds on the existing relationship between McPherson’s and ABM, and is in line with McPherson’s strategy to drive growth in export markets by capitalising on the strong demand for the Dr LeWinn’s skincare products.
Dr LeWinn’s has been managed and distributed by ABM in Greater China for the past two years and has seen sales in the market grow from $400,000 to FY17 to $3.3 million in FY18 and $16.7 million in FY19.
For the 2020 financial year, McPherson’s is targeting net sales of $25 million and if successful, this would make the Chinese market the largest offshore market for McPherson’s – accounting for approximately 12 per cent of McPherson’s sales.
Under the terms of the joint venture agreement, ABM will acquire 51 per cent of the Joint Venture Equity (JVE) that is to be incorporated by ABM and McPherson’s in Hong Kong.
However, only ABM and the JVE will be granted exclusive distribution rights for Dr LeWinn’s branded products throughout Greater China.
The joint venture agreement requires ABM to achieve a target of $35 million in annual purchases of Dr LeWinn’s products in any year prior to June 30, 2022.
ABM can also have aggregate purchases of $82.5 million over the three-year period ending June 30, 2022.
However, if ABM does not achieve either one of these targets then the Dr LeWinn’s trademarks will be sold back to McPherson’s at the initial nominal valuation.
“This JV fits perfectly into our strategic approach to expand international exports in Greater China, which we believe is extremely attractive given the demographics and size of the market,” McPherson’s Managing Director Laurence McAllister said.
“The JV gives McPherson’s greater conviction to achieve our ambitious aspirations for growth in Greater China, by solidifying our relationship with an incredibly successful partner, with a proven track record of market expansion,” he added.
In parallel with this joint venture agreement, McPherson’s and ABM have also extended the exclusive distribution agreement for the Dr LeWinn’s brand in Greater China until June 30, 2022, with the potential to extend.
In response to this news, McPherson’s share price is up 9.60 per cent with shares trading for $2.74 apiece.