Zoono signs five-year exclusive online sales deal with Chinese distributor

Global bio-technology company Zoono Group (ASX: ZNO) has signed a sales and distribution agreement with Guangzhou Sanchengyun Trade Co Ltd for the sale of Zoono-branded products online in China.

Under the terms of the five-year online-only agreement, Guangzhou Sanchengyun must meet minimum annual purchase volumes from Zoono of at least $837,000 within the first 12 month period and $1.12 million in the following year.

The third year requires a minimum purchase volume of $1.49 million and will increase by 10% annually for the remainder of the agreement.

Zoono has already received approximately $437,000 as a deposit against first-year purchases from Guangzhou Sanchengyun, with the first product order of $293,000 to be supplied to the company next month.

Online growth

Online retail sales in China have been growing at a fast pace in recent years and sales in this market are expected to generate significant revenues for Zoono.

“China continues to represents a huge opportunity for [us] – it is the second largest economy in the world,” the company said.

“[We are] targeting distributors by market segment in China, offering partners exclusivity in their particular sectors and [we hope this will be] the first of several planned sales and distribution agreements with Chinese distributors over the next year.”

Antimicrobial products

Zoono develops, manufactures and distributes a suite of scientifically-validated, long-lasting and environmentally-friendly antimicrobial solutions with a view to improving health and well-being through innovative, safe, non-toxic and durable germ protection.

The company produces sprays, wipes and foams suited for skin care, surface sanitisers, and mould remediation treatments.

Zoono’s technology is based on the ‘zoono molecule’ – a unique antimicrobial molecule which bonds to any surface and kills pathogens including bacteria, viruses, algae, fungi and mould.

Guangzhou Sanchengyun is a privately-owned company with annual sales revenue of more than $51 million and customers across all major online platforms.

Established in 2012, Guangzhou Sanchengyun has now employed a dedicated Zoono online sales team, with the company employing more than 40 people.

Strategic review

The new agreement follows Zoono’s recent announcement of decreased sales figures for the 2019 financial year due to a strategic business review which it referred to as “building the foundations for longer term sales success and future profitability”.

In 2018, the company changed its focus to a core group of potential business-to-business customers in North America, Europe, China and India with the capacity to drive sales growth through ongoing product orders.

It also deferred the pursuit of its business-to-customer retail business but opted to retain its online sales, acknowledging that it “does not have either the funding necessary to build a retail brand or, with limited human resources, the capacity to build a global retail business”.

“During 2019, [we] reviewed our distribution arrangements in many countries including China and, in recent months, opened discussions with our US distributor on revised arrangements for the marketing of Zoono products in North America,” the company said in its July quarterly.

“With the strategic focus on putting the building blocks into place, sales have suffered in the 2019 financial year however we believe we have made good progress in implementing our strategy.”

With approximately $2.89 million cash at bank, stock of $468,000 and receivables of $546,000 (unaudited), management said the company would be “adequately funded” to continue its strategic growth plan through the 2020 financial year.

At midday, sales in Zoono were up 12.68% to $0.08.