In a rollercoaster day for health and wellness company Fiji Kava (ASX: FIJ), its acquisition of American kava brand Leilo was terminated due to shareholder disagreements. At the same time, it brought on a new distributor—CJ Patel—in an $11 million deal.
Fiji Kava had been preparing for this acquisition for a while, as it was an integral part of its US growth strategy. After dedicatedly cutting costs and raising capital, this is a disappointing loss for the Company.
CEO Anthony Noble commented, “While we have worked closely with Leilo management to find a structure that will enable the transaction to proceed as an all stock and debt-free merger, at this point in time, we could not achieve consensus between Leilo’s shareholders and noteholders on terms that the Fiji Kava Limited Board could recommend to our shareholders.”
Fiji Kava is a natural medicine and beverages company that offers a range of products, from functional beverages to capsules, shots and more, sold under its brands: Fiji Kava, Danodan Hempworks and Taki Mai. Kava is often at the heart of Fiji’s healing ceremonies, said to induce a state of calm and relaxation. Perhaps that mentality helped the Company move on to its next ordeal after the acquisition lapse: a new distributor agreement for Taki Mai.
Fiji Kava’s wholly-owned subsidiary South Pacific Elixir has appointed CJ Patel as its exclusive distributor across 17 countries. Per the agreement, exclusivity is contingent on achieving at least $11 million in sales across three years, split into three tranches of $1.96 million, $3.92 million and $5.22 million. The product range will be sold in Fiji, New Zealand, Australia, PNG, Samoa, American Samoa, Tonga, East Timor, Canada, USA (retail), Nauru, Marshall Islands, Kiribati, Cook Islands, Solomon Islands, Wallis and Futuna and Vanuatu.
Noble added, “CJ Patel is the ideal distribution partner for Taki Mai. They are the largest FMCG distribution company in the Pacific, with a supply network that also extends to Australia, New Zealand, Canada and the USA. They also have great expertise in targeting consumers from Pacific Island communities in those countries which represent a big segment of our target market.”
With new product formats being introduced to Taki Mai soon, the Company is optimistic about its sales future. Its heritage branding and recognition in the Fijian islands is an added benefit.
CJ Patel Group COO, Vishwa Sharma, shared, “We are excited to embark on this partnership with Fiji Kava and are confident in growing and taking on [the] number one position in the category. Our philosophy has always been to build on brands to make them number one. With Fiji Kava and the Taki Mai brand, we are fully and wholly committed to driving distribution within our customer base across all our territories.”
In Q2 FY23, Fiji Kava recorded a revenue of $321k, up from $286k in Q1. It also received cash receipts of $497k, representing a 103% increase on Q1. More than 50% of its revenue comes from the US, making it an integral market and the acquisition fallout a notable setback.
That has not deterred its American dream. The Company will still launch its functional beverage products in the USA under Fiji Kava’s proprietary and new brands, including sparkling and ready-to-drink beverages and juice-based products. Plus, its dietary shots range will be launched with The Vitamin Shoppe in more than 700 US locations mid-year under Fiji Kava’s brand.
Fiji Kava is living out the philosophy of when one door closes, another opens. However, how successfully this new door navigates US waters is yet to be ascertained.
Alinda is a Business Reporter for The Sentiment
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