TIDMZOE
RNS Number : 9731B
Zoetic International PLC
05 February 2020
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO
CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN.
5 February 2020
Zoetic International plc
("Zoetic" or the "Company")
Trading update
Zoetic, the London listed vertically integrated CBD company, is
pleased to provide the following update on its operations.
Highlights
-- Two major distributors in the US proposing to take on the Company's Chill products
-- Trials underway with contract manufacturers
-- Launch of CBD gummies in the UK generating significant interest
-- Company on track to commence sales of feminised hemp seeds, including outside of the US
-- Recovery of funds from legacy business continues
Retail products
Chill in the US
Chew pouches remain the Company's best-selling product by volume
and the introduction of two new flavours, vanilla and peach, before
the end of 2019 has continued the success of this product. In
addition, Zoetic introduced two further blends (Mintz and Calm) to
its range of Chill smokables.
Progress with Mr Checkout has surpassed expectations with one of
its partners, AATAC (a US national association comprised of smaller
buying groups), expressing interest in taking both the chew pouches
and smokables for distribution to its convenience stores in Florida
and the surrounding area. Brands represented by AATAC include Gulf,
BP, Sunoco, Circle K and Chevron.
In addition, Zoetic has developed interest from New Age
Beverages Corporation, a Nasdaq listed distributor of healthy,
natural products. New Age Beverages' supplies a number of well
recognised brands including Nestea, Xing, Marley, Volvic and Coco
Libre. New Age Beverages already distributes CBD and is interested
in adding Chill's chew pouches and smokables to its supply
chain.
Securing an increase in manufacturing capacity has to date been
an impediment to progressing with these distributors, but the
Company is now pleased to announce that trials are underway to
contract manufacture both the chew pouches and smokables.
Furthermore, initial products from these trials have been of very
high quality.
Retail prices for both products will remain in the sub-US$10
range and Zoetic will sell to the distributors at around half of
that price. Depending on volumes, the Company expects to earn
around a 50% gross margin.
Total stores represented by these two distributors are
approximately 12,000. The Company's realistic objective is to
supply around 500 new stores per month, subject to customer demand
and manufacturing constraints, and so management estimate that it
is likely to take up to two years for products to be rolled out
across the entire network. Zoetic has recently been selling between
two and three packs of each of the chew pouches and smokables per
store, per day, where they are currently stocked. However, these
have been achieved with the products being placed on shelves with
multiple other brands. Moving forward, the Company is introducing
display cases which hold 48 of its products. These are typically
placed on the sales counter and, by increasing brand awareness,
management estimates that the introduction of these cases could
potentially double daily sales given the prominence they give to
the Chill brand and products.
Subject to concluding a successful trial with the contract
manufacturers in the coming weeks, Zoetic intends to enter into
contracts with both distributors with the target of supplying
initial stores by the Spring.
Zoetic / Chill in the UK
The UK retail division now has 19 product lines following the
launch of its CBD gummies this week. There has been a concerted
approach to build brand recognition through targeted media
campaigns and, since the beginning of 2020, the Zoetic brand has
featured in the Times, the Sunday Telegraph, Easyjet's in-flight
magazine, Absolutely London, Spa Elemental, Styletto and Northern
Life amongst others. Whilst it is too early to draw definitive
conclusions, there has been an increase in online sales, as well as
new wholesale customers, so it appears that the strategy is
working.
It is the launch of CBD gummies that has generated most interest
in recent weeks, including from certain retail chains, and the UK
team have been focused on building interest in these product lines.
These edible sweets are suitable for vegans and available in two
flavour combinations, "tropical" and "berry burst", and two
strengths of 10mg and 25mg. As previously announced, the gummies
also represent the Chill brand's first introduction to the UK and
Europe.
In the coming weeks, the UK customer website will be upgraded
and relaunched as www.zoetic.com and the Company will continue to
build its presence in the UK retail buying community, attending
Natural & Organic Products Europe in April and Beauty UK in
May.
Feminised seeds
Zoetic has successfully produced feminised hemp seeds and,
assuming that further crops bring sufficient volumes and the
quality of the seeds is high, the Company plans to start commercial
sales in the coming weeks. In preparation for that, Zoetic has
registered as a seed distributor in five US states and is also
developing a bespoke website to advertise seed sales.
Zoetic's strategy will be to focus on accessing newer hemp
markets where it believes pricing will be more robust than in
traditional growing regions. One significant development is that
the Company has received enquiries from growers outside of the US
and it is currently working on the feasibility of enabling supplies
to them.
Recovery of funds from natural resources business
The process of recovering capital from the Company's legacy
natural resources business continues. As announced at the time of
the interim results, the monthly revenue from the East Denver
project, combined with a cost reduction exercise, has created a
profitable natural resources division and consequently a
determination by the Board to sell the assets at only a compelling
price. Nevertheless, there remain a limited number of physical
assets that are not essential to the operation of the division and
plans are in place for these to be realised. The amounts are
unlikely to be significant (a little over US$34,000 has been
received so far this year for example) but the management team are
conducting a thorough review so as to realise full value for
shareholders. Of more significance are the various bonds lodged
with state authorities. Approximately US$270,000 remains
outstanding with US$50,000 expected imminently and the balance
during the course of this year.
Trading on the OTC
Zoetic's ordinary shares have been trading on the OTC in New
York since November last year and a focus of the Company's investor
relations activity in 2020 will be to develop its profile in the US
with the aim of building liquidity on the OTC. To that end, the
Board has been examining different options and further details will
be announced in due course.
Appointment of new financial adviser and broker
Zoetic is also pleased to announce the appointment of Allenby
Capital Limited as its financial adviser and broker.
Nick Tulloch, Chief Executive of Zoetic, said:
"Our business continues to develop on all fronts and, although
competition in the CBD industry shows little sign of abating, our
strategy of leading with compelling branding is beginning to show
signs of paying off. In both the US and Europe, our Chill and
Zoetic brands are consistently well received and the fact that we
now have interest in our range of Chill products from partners such
as AATAC and New Age Beverages evidences the scale of the
opportunity.
"The onus is now on us to deliver our products at high volumes
and with no compromise on quality. We believe our switch to
outsourced manufacturing will achieve this and our trials will be
completed in the coming weeks following which our distribution
contracts will get underway. In the UK, our Zoetic products
continue to receive positive reviews and the launch of gummies
under the Chill brand this week is already showing signs of being a
success.
"I am also pleased to report the successful production of
feminised seeds. Volume is important in this part of the industry
and we will wait to produce greater numbers before formally
launching our sales programme, but preparations are well underway
and shareholders can look forward to further news shortly.
"We remain an early stage business with much to prove but I am
pleased with the substantial progress we have made in a little over
10 months from a standing start. This has given us the belief that
we can convert our branding and marketing efforts into significant
sources of revenue."
**ENDS**
Enquiries
Zoetic International plc +44 (0) 1738 472 029
Nick Tulloch
Allenby Capital Limited (Financial Adviser and Broker) +44 (0)
20 3328 5656
Nick Harriss
Nicholas Malins Smith
Nick Naylor
IFC Advisory Ltd (Financial PR and IR) +44 (0) 20 3934 6630
Tim Metcalfe
Graham Herring
Florence Chandler
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END
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