Neptune Wellness CEO talks Unilever partnership, distribution model, coronavirus and more
The Fly conducted an exclusive interview with Michael Cammarata, chief executive officer of Neptune Wellness Solutions (NEPT) on the company’s new partnership with Unilever (UN, UL). Here are the highlights:
UNILEVER PARTNERSHIP: Neptune Wellness, a company that specializes in the extraction, purification and formulation of health and wellness products, announced Thursday it is partnering with Unilever as an “import and Stocking U.S. & Canadian Master Distributor and Logistics Partner”. The company is teaming up with Unilever’s selling partners to provide them with the availability of products in its warehouse system in the U.S. and Canada to support the growth of the hygiene category. The CEO said he believes the master service agreement with Unilever came about as part of a trend in the consumer packaged goods industry to partner with entities to scale up and down on demand. “We just successfully launched our new platform for distribution with lots of our hand sanitizer products,” he said. “We do that very effectively from Costco (COST) to Home Depot (HD) to lots of big customers and we built that supply chain quite rapidly as we’re building out our distribution internationally and domestically. The opportunity came to partner with Unilever on the hygiene category and bring in additional customers into that in the professional channel as well.” Cammarata added the new supply chain is built for on demand so Neptune can scale rapidly up and down as needed to launch products and the Unilever deal validates Neptune’s 2.0 distribution program. “As we started entering with our brands and other brands into the marketplace, we wanted to build a new supply chain that was modernized,” he said. “One thing that COVID has done is forced people to look at digital working as well as new supply chains that can ramp up and down based on demand and react in near real time. This partnership obviously allows us to further validate our new way of distributing product in North America and different places in the world but also makes it easier for certain retailers as well as businesses to get product.” Cammarata said the ultimate goal is to deliver product efficiently and fast and bring innovations to the market quickly. “We’re seeing a whole new array of innovations when it comes to hygiene products and we want to be in position to bring those brands and products to the consumer faster and to the businesses as well,” he said. “Our new supply chain structure really allows us to bring innovation from thought to reality to consumer or business owners’ hands in weeks.”
CORONAVIRUS: The partnership is in part COVID-19 driven as Neptune will be bringing Unilever’s personal care and hygiene products to market under the Suave, Lifebuoy and Dove brands, including hand sanitizing wipes, hand sanitizing wash and gels and protective face masks. “COVID is something that really woke up the world to the fact that we need to make sure that we continue to educate consumers to put in safety mechanisms at businesses and households,” Cammarata said. He added that coronavirus created awareness that people should not travel when they’re sick, should obviously wash their hands and should be using hand sanitizers and disinfectant wipes. “We’ve seen data that when you look at the H1N1 as well as other little outbreaks that became in big in some regions, you see an increased demand for sanitation products and hygiene products sustained in different territories around the outbreak,” he said. “This is something that’s in demand globally and is going to increase, not just in terms of territories.” The CEO said the coronavirus has also caused businesses to step up to ensure sanitation products are available for consumers and better cleaning protocols are being put in place. “The consumer is more vigilant than ever and it’s proven not just demand for households but also demand for the business uses,” he said.
ANALYST VIEW: Following Neptune’s announcement, Alliance Global Partners analyst Aaron Grey reiterated a Buy rating and C$6 price target on the company. The analyst said he believes the partnership aids in the company's goal of building scale and B&M access in the more traditional HPC space and will serve as a vote of confidence to the overall company and its ability to partner with major players in the category. When asked about building scale, Cammarata said, “We’re a consumer-packaged goods company that focuses on emerging ingredients and plant-based ingredients. We’re already building out distribution, so for us to bring innovations to the pipeline right now it shows that we can do that quick and efficiently.” The CEO noted the company’s partnership with IFF to develop brands and said Neptune has relationships with other strategics and retailers. “It shows we’re making a product today for tomorrow but at the same time we’re delivering these products into some amazing distribution chains,” he said. “It is a very complicated process because the whole world has changed since COVID to more of on-demand, real-time fast-moving products and the demand for products has grown quite rapidly for delivery and last-mile. It’s really put us in the forefront of being able to get products to not only just consumers but also businesses on demand in real time.” The CEO added it also puts Neptune on the forefront for the brands in its portfolio as well as brands the company collaborated on. “That modern-day supply chain will allow us to grow and succeed with our brands and I think that that’s something that’s been very unique because we have one of the largest extraction capacities as well in North America,” he said. Cammarata noted the company can go up to 1.5M kilos in North Carolina, 1.5M kilos with expansion in Sherbooke, has state-of-the-art innovation centers and creates IP like Maxsimil. “We’re focusing not just delivering products but innovating products and we partnered with the biggest companies in the world to bring innovation to the consumer faster in a 2.0 model and I think that’s something that’s really going to set us apart,” he said.
PARTNERSHIP EXPANSION: When asked about the potential expansion of Neptune’s relationship with Unilever, Cammarata said he is very confident the relationship will expand into different areas and continue to grow. “Their teams have been working really good with our teams and we have some amazing people that have joined us from Walmart (WMT), Clorox and even Unilever that our teams are really excited about,” he said. “We’ve already have started to see success.” The CEO added the company would like to see the partnership grow and will continue to support that growth. “We’re really excited to validate this new model of delivering products in a faster efficient way to multiple type of customers.”