Not all change associated with a pandemic is bad. One thing that could potentially change for the better as a result of COVID-19 is people taking a more proactive approach to their healthcare.

The latest pandemic is already prompting people to not just see a doctor when something is wrong, but also engage in broader preventative measures to avoid the need to see a medical professional in the first place.

That is where wellness products from vitamins to probiotic drinks are coming to the fore.

These were already large markets. For example probiotic drinks is a market worth $50bn right now, according to Atlas Advisors Chairman Guy Hedley.

Two-and-a-half years ago Hedley put his money where his mouth is by investing in PERKii, a probiotic drink startup spun out of the University of Queensland.

And the drink, which is designed to improve gut health, is witnessing further increased sales, according to Hedley, PerKii CEO Anthony Davie and fellow investor Uniseed CEO Peter Devine.

The drink is “helping us stay healthy in these unprecedented times”, they said.

Hedley believes these types of wellness products are still gaining in popularity.

“This company had no revenue two years ago but now it is nationally distributed and it’s an Australian product,” he told Stockhead.

 

Capturing greater market share

Last week Taylor Collison tipped Aussie listed small cap Probiotech (ASX:PBP) to “outperform” in the months ahead.

Analyst Stephen Scott said it was likely to be enjoying strong demand for its products and would benefit from the rise of bulk billing and prescriptions via telemedicine.

“We believe that consumers are increasingly focusing on wellness and prevention and that sales of vitamins and associated products are likely to be elevated for some time,” he said.

“Independent Industry sources have also corroborated the current high levels of consumer demand.”

Scott also suggested that while Australia was a net importer of medicines and only had 1 per cent of the global market, self-sufficiency was likely to be government policy going forward — a benefit that would trickle down to companies like Probiotec.

 

The Aussie players

There are about a dozen small caps on the ASX with exposure to the wellness sector.

In the last month they have gained an average of 11 per cent and in the last week 17 per cent — pretty good considering the broader market plunge in the last month.

Swipe or scroll to reveal the full table. Click headings to sort.

Code Name Price 1M % Return Market Cap
3PL 3P Learning 0.96 37.1% $132.5M
RCL ReadCloud 0.31 0.0% $29.4M
OLL Open Learning 0.23 39.4% $32.12M
JAN Janison 0.3 -17.8% $54.5M
SCL Schrole 0.11 -8.3% $8.92M

 

Some of these stocks have made inroads in the last month. The most notable of these is Holista CollTech (ASX:HCT). It is best known for its hand sanitiser which has been in rapid demand in 2020, but the company also makes dietary supplements.

Skin Elements (ASX:SKN) is another in this field, and while it has teamed up with Holista recently to make hand sanitiser, its bread and butter is skin care products such as sunscreen and body wash.

Chairman Peter Malone told Stockhead Skin Elements’ prior experience served it well for its newest endeavour.

But Skin Elements and Holista are partnering to make a product the pair expect to be the new norm going forward, rather than just a short-term fad driven by the COVID-19 crisis.

“The market sees the opportunities in [COVID-19] but it’s got nothing to do with the virus as such,” Malone said.

“This is a natural, organic product that does not use alcohol as the ingredient. It uses the anti-microbial benefits of its significant ingredients.

“If you’re using alcohol [skin care] products you’re getting dermatitis, it probably takes a couple of years to get rid of. I think we are one of the strongest in that [hand sanitiser] space because we’re in the safe area — the days of the alcohol sanitiser are over.”

Meanwhile, RooLife (ASX:RLG) and AFT Pharmaceuticals (ASX:AFP) yesterday announced a partnership to sell vitamin-c products into China. Stockhead has contacted RooLife for comment.

Beauty brand owner BWX (ASX:BWX) and Wellness & Beauty Clinics (ASX:WNB) are two other stocks that sell primarily skincare and spa products.

The latter of these stocks struggled for several months before announcing it was selling hand sanitisers. Since then it revealed the bad news that it had to shut its brick and mortar clinics, but says it can concentrate on its brand portfolio.