Health and skincare products distributor Careline Australia is taking ASX-listed Food Revolution Group’s juices, kombucha and vitamin products to China, under a $20 million per year distribution deal.
Careline founder Norman Li will also lead a $20.25 million investment in Food Revolution Group, which will result in him being appointed as the company’s new chairman.
Careline, which was established by Dr Li in Sydney in the 1990s, will distribute the products through its sales network of 10,000-plus daigou, shoppers who import products on behalf of others, often earning a healthy margin.
Dr Li’s company has a strong history of manufacturing and distributing Australian health and skincare products in China, with its products sold in thousands of stores in more than 20 provinces and cities, including Beijing, Shanghai, Guangzhou, Chongqing and Chengdu.
The distribution deal has minimum sales targets of $20 million per year.
Careline will work closely with Food Revolution Group to tailor existing products and develop new lines for the Chinese market, including bottled drinks, healthy shot and sachet drinks, as well as contract manufacturing deals with potential customers.
In a separate deal, Dr Li will lead a group of strategic investors who will pour up to $20.25 million into Food Revolution Group, priced at 5.4 cents per share.
The placement will take place via five tranches, with Dr Li to be appointed chairman of Food Revolution Group following the second tranche.
Dr Li will also have the right to appoint two new directors to Food Revolution Group.
Careline will also be incentivised to grow Food Revolution Group sales in China to at least $100 million over the next three to five years, with up to 190 million performance shares, which will be convertible to ordinary shares if certain milestones are met.
Food Revolution Group chairman Bill Nikolovski said the deals would transform the company in both the Australian and Chinese markets.
“Working with Careline to move our existing and new products into China is a huge opportunity for our Company, as entry into the Chinese market has been a long-term goal for us,” Mr Nokolovski said in a statement to the ASX.
“We have been achieving strong growth of our branded products in Australia and with the partnership with Careline it will give us a step change in sales with access to the Chinese market.
“Careline and Dr. Norman Li have a deep and proven understanding of the Chinese consumer and have an established distribution and marketing platform that we will work with Careline to leverage.”
Dr Li said he was excited for the opportunities that will develop through the partnership with Food Revolution Group.
Taylor Ellison is acting as corporate advisor to the transaction.