Comment on Eevia’s reorganized distribution in North America and New Order

Eevia Health Plc’s (”Eevia” or ”the Company”) announced on the 10th of January 2024 that the Company has reorganized distribution in North America with the objective to have a more transparent value chain beyond the distributors, which will result in shortened delivery time to end clients as well as reduced logistic costs for Eevia.

Eevia implemented a new policy in early 2023, requiring transparency with distributors regarding the end clients of sales in all markets. Moving into 2024, Eevia is working with Select Ingredients as a distributor in the US, while the distribution agreement with Barrington has been terminated, thereby transferring Barrington’s client relationships to Eevia’s new Commercial Director, Erik Eide, who joined the Company in December 2023.

Eevia is initiating collaboration with a local New Jersey company specializing in forwarding dietary ingredients under the USDA NOP program, which facilitates the import of products to the US, allowing Eevia to maintain buffer stock in New Jersey with all transaction certificates issued (including the NOP organic certificate) ready for customers.

The agreement enables cost-effective transportation of larger volumes from Finland to the US via sea freight, avoiding the more expensive air freight. This approach not only reduces transportation costs but also streamlines handling, customs procedures, and certification efforts on larger volumes with less time pressure.

In addition to the abovementioned news, Eevia communicated today that the Company received an extension of EUR 11k (SEK 115k) to the sales order of EUR 22k (SEK 228k) which was announced on the 20th of December 2023. The initial order as well as the extra order is from a German customer for Feno-Myrtillus® 36 organic, an organically certified bilberry extract, which the Company has in stock for immediate delivery.

Analyst Group’s view of the news

Analyst Group has an optimistic view of the new distribution partner with a local presence in the US, as it is expected to improve the Company’s value proposition by enabling faster delivery, higher reliability of supply, and simultaneously reducing logistic costs. In light of Eevia’s announcement in the Q3 report regarding the Company’s intent to diversify the customer base and reduce dependence on a few major customers, the reorganized distribution strategy in North America is seen as an initial stride toward broadening the Company’s presence in the North American market. This could potentially serve as a strong growth catalyst in the years to come, given the substantial market potential.

With a reorganized distribution system in place and a new, experienced Commercial Director based in North America, Eevia has laid a solid foundation to capitalize on the increased demand from the North American market. The Company communicated that this increased demand was observed during the Supply Side West tradeshow in Las Vegas in Q3-23, and Analyst Group expects the Company to convert some of this into actual sales contracts going forward.

Additionally, as one of Eevia’s major clients temporarily suspended order placements in Q3-22 due to inventory buildup, creating short-term pressure on revenue growth, it’s imperative for Eevia to uphold effective cost control. Reducing logistics costs by reorganizing distribution is a vital step in maintaining a healthy cost base, while simultaneously paving the way for future growth and is well-positioned to capitalize on the growing demand from the North American market.

Regarding the additional order of Feno-Myrtillus® 36 Organic that Eevia communicated today, Analyst Group is encouraged to observe continued demand from the German customer for Eevia’s concentrated bilberry extract. Eevia has communicated several sales orders since the publication of the Q3 report in late November, ranging from EUR 11k to EUR 69k, totalling EUR 218k. Despite the challenging market conditions, the steady sales momentum reinforces the market interest in the Company’s products, indicating that Eevia meet the markets demand.