Medicinal health and wellness company Fiji Kava (ASX: FIJ) has announced a landmark agreement to make PuMate (Shanghai) Limited an exclusive and authorised distributor of its natural noble kava products in China.
The deal targets minimum sales of $8 million for Fiji Kava over an initial three-year term, making the partnership one of the company’s most significant commercial milestones to date.
Under the terms of the agreement, PuMate will distribute Fiji Kava noble kava extract and the company’s ‘Sleep’, ‘Mind’ and ‘Body’ product ranges to its established network across China’s cross-border e-commerce marketplaces and complementary medicine, personal care and pharmaceutical industry.
Fiji Kava will offer incentives for PuMate to meet targets, including the issue of up to 1.5 million options on the achievement of $10 million in annual gross revenue.
The agreement includes extension terms for periods of 12 months, as well as provisions that allow Fiji Kava to terminate the agreement with written notice if PuMate fails to meet key performance indicators or breaches agreement conditions.
Deal follows PMM partnership
PuMate is an affiliate company of Chinese pharmaceutical supplier PMM Company, which signed a memorandum of understanding with Fiji Kava in May to explore kava distribution opportunities in China.
According to Fiji Kava, PuMate has a proven track record of distributing international food ingredients, sports nutrition and infant nutritional products – including Bubs Australia (ASX: BUB) formula – in China.
“This agreement is one of the most material commercial deals in Fiji Kava’s history, which creates a major new opportunity for the company to enter China’s vitamin and supplements market, the second largest in the world and estimated at RMB 149 billion (A$30 billion),” Fiji Kava chairman Dr Andrew Kelly said.
Fiji Kava non-executive director Nicholas Simms added that the agreement has been structured in a way that diversifies the company’s revenue streams in China “via co-development possibilities with manufacturers of vitamins and supplements in China, and sales of Fiji Kava’s existing product ranges through cross-border e-commerce marketplaces and retail partners”.
“There is a growing Chinese investment in the Pacific, with the two regions sharing strong ties and Fiji a signatory to China’s Belt and Road initiative. This unique partnership enables us to capture the growing demand for kava in China, as part of our offering as a vertically integrated primary producer and processor of Fijian noble kava,” he said.
Australia and New Zealand markets
The company also has retail agreements in place with Coles (ASX: COL) supermarkets in Australia and Green Cross Pharmacy in New Zealand, and has expanded its e-commerce presence on Amazon in the United States.