Digital sensor manufacturer Simavita (ASX: SVA) has added some much-needed commercial impetus to its operations after announcing the company’s first major marketing agreement.
Simavita has said the agreement is targeting the sale of “adult and infant products” incorporating the company’s AlertPLUS platform technology.
Initially, the agreement is expected to be limited to major customers in mass markets in North America and Europe although Simavita is hopeful of being able to expand its global market coverage in due course.
Simavita has said the agreement includes a targeted roll-out “aimed at up to 4 major customers in North America and Europe” with annual product purchases of around €200 million (A$310 million), which means its digital sensors could be used in millions of diapers being sold to consumers in the US and Europe.
The terms of the agreement stipulate that Simavita will be entitled to a share of future profits with the company warning that profitability is “anticipated to vary” according to the size and nature of sale agreements struck with end-user customers.
Diapers as an industry
Diapers are considered a staple industry that consistently generates a large volume of sales globally. Market analysts have estimated that by the end of this year, the global diaper market will top out at US$64 billion (A$87 billion) in annual sales with an addressable market of around 100 million people.
Simavita says that the diaper industry is highly commoditised with only “marginal change” seen in product functionality over the past 25 years – a status-quo it hopes to disrupt with its AlertPLUS technology.
AlertPLUS incorporates “smart, wearable and disposable sensors” embedded in the diaper to facilitate a broad range of functionality for customers including real-time monitoring and interaction features.
The company has publicly said that it anticipates its proprietary technology to position the company to “develop, modify and distribute apps for end users” that improve the day-to-day engagement of mothers to infants and carers to adults.
Another sensor product within its product portfolio is AssessPLUS, a tablet-based product for the assessment of incontinence which delivers a “personalised, evidence-based incontinence care plan.”
As an industry, diaper sales are dominated by retail organisations and increasingly, by online sales.
Over the past decade, customers have begun to demand greater functionality and better cost-effectiveness which has led to what’s known as “white label manufacturing” whereby major retail stores brand generic products with their own branding despite not manufacturing the products themselves.
The strategy has been shown to boost volume sales with the diaper industry becoming a prime candidate that attracts white label manufacturers.
“There are currently few major performance or other differences between diaper products, leading to a highly competitive industry seeking new technology,” according to Simavita.
“With the support of our shareholders, we’ve worked hard over the past 2 years to implement our PIVOT strategy. We have completely rebuilt and repositioned the company and our product portfolio,” said Simavita chairman Michael Spooner.
Mr Spooner added that today’s marketing agreement for targeted sales validates its PIVOT strategy which would be extended given the “excellent commercial start to the tremendous opportunity that we believe has now been established,” he said.
“Simavita’s opportunity from here is to materially build our revenue pipeline by licensing the AlertPLUS platform technology, whilst maintaining a low-cost structure,” said Mr Spooner.