Health and wellness company Wellnex Life (ASX: WNX) has partnered with Australian Dairy Nutritionals Group (ASX: AHF) (ADNG) to produce the country’s first organic A2 infant formula range using 100% Australian milk.
The complete range will be sold through Wellnex’s retail and pharmacy distribution network, while the future Gradulac Gentle infant formula product will be sold through pharmacies only.
Over time, the partners may agree to expand into the retail grocery channel space.
Under the terms of the joint venture agreement, ADNG will be responsible for manufacturing the products over an initial 12-month period at its new infant formula plant currently being commissioned in southwest Victoria.
This may be extended for a further two years provided the joint venture achieves specified monthly sales targets of the new products, assessed on a rolling three-month basis.
ADNG will use organic A2 protein milk sourced from its own farms located 20 minutes from the plant in what is commonly known as “the golden triangle” of Australia’s dairy industry.
The producer will also maintain exclusive rights to distribute the range internationally including through cross-border e-commerce arrangements in China.
Wellnex will be responsible for sales of the products into its existing Australian retail and pharmacy channels, and will receive a royalty on ADNG’s international sales.
The joint venture will commence in January and will be conditional upon the partners achieving listing of the two new ranges in a major pharmaceutical retailer.
At any time within two to five years after the commencement of supply, ADNG will have the option to purchase Wellnex shares in the joint venture based on an independent valuation.
Wellnex chief executive officer George Karafotias said the joint venture would be a vehicle to accelerate distribution of new products.
“It will allow us to distribute and sell unique, in-demand premium milk products through our substantial network,” he said.
“We are very excited about the potential of this agreement to formulate new and innovative products for Australian and international shelves in a cost-effective manner.”