Wellnex will launch a new direct-to-consumer platform to fast-track profitability and ease inflation pressures.

Health and wellness company Wellnex Life (ASX:WNX) will roll out a new digital platform and marketplace that will deliver higher margins and offset challenges posed by rising inflation.

The new venture will be wholly owned by Wellnex and feature its exclusive brand under which the company will retail a complete set of health and wellness products, including vitamins, beauty serums and yoga mats.

Wellnex Life CEO George Karafotias said the platform will accelerate the business’s revenue growth and help bring the company to profitability, faster.

“Currently, when you sell a brand or product to Chemist Warehouse, you’re making a 35-40% margin but so is the retailer so in this new digital channel, you’re going to be keeping all that margin for yourself,” Karafotias said.

“The good thing about keeping all that margin is that it gives you the flexibility to promote it, to spend a bit more money on marketing because you’re getting a good return on every dollar you make from the platform.”


Margins closer to 70% as inflation costs rise

Mr Karafotias said every dollar spent through the new platform would be roughly equivalent to $2 spent in-store through Wellnex’s various distribution partners, including Chemist Warehouse, Woolworths, and Coles.

He said sales through the new direct-to-consumer platform would net the company margins closer to 70%. Importantly, he said it would give the company a powerful tool to negotiate surging inflation.

“Things are getting harder and tougher for businesses, and margins are getting squeezed – retailers aren’t allowing you to put your prices up in line with what the input costs are,” he said.

“Having a tool where you can promote and market directly to the consumer and adjust your prices accordingly is very powerful.

“And because you’re starting off with a bigger margin, you’re able to absorb any one-off costs, which gives us a bit more flexibility.”

New brands and solid distribution deals

The new platform coincides with Wellnex launching new brands and entering supply deals, including with GlaxoSmithKline Consumer Trading Services, a subsidiary of the eponymous US$80bn global healthcare giant.

The agreement will see Wellnex Life license and supply its innovative paracetamol soft gel liquid analgesic product to GSK.

The company has launched three new brands within the past nine months.

Two more brands – Pharmacy Own and Ocean Road Dairies (a joint venture with Australian Dairy Nutritionals Group) – are scheduled for release before year’s end.

Karafotias said the successful launch of these new brands has turbocharged revenue growth in the past quarter.

Receipts from customers for the three months ending March 31 hit $3.6 million, marking a 606% increase on the prior corresponding period (pcp).  Net cash loss from operations fell 71% from the prior quarter to $840,000.

“We’ve had another good quarter, and a lot of that has been because we launched those three new brands,” Karafotias said.

“The current business we have is going to continue to grow as we keep growing awareness of the brands and their products, but the exciting part for me is Pharmacy Own will launch in the second half of this year.”


Joining forces with CH2

Pharmacy Own will be distributed by Clifford Hallam Healthcare CH2, one of Australia’s largest medical supplies distributors, under a joint venture agreement.

CH2 has a distribution network of more than 2500 pharmacies outside of the Chemist Warehouse franchise and plans to sell Pharmacy Own into this network.

“The good thing about that is the more CH2 sells, the more money both of us make,” Karafotias said.

“But at all times the brand belongs to us, and we haven’t entered a joint venture on the brand, we’ve entered a joint venture on the business.”

This article was developed in collaboration with Wellnex Life, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.