Newsletter December 2020 Ourui Health Growing appetite for natural, Salon distributors key to distribution agreement functional cosmetics in China US market Page 3 Page 4 Page 10 1 MESSAGE FROM THE CEO I am very pleased to report that we are Aeon agreement for the évolis® pharmacy heading into the new year with positive products which, together with Ourui, could momentum, due to the underlying resilience contribute up to 40% of our total revenue by of our core consumer health business and FY2023. the recent signing of a 10- year Chinese There is a growing demand for natural distribution agreement with Ourui Health functional cosmetics in China, and we are Management. now well positioned to take advantage of We have executed the pivot from a mixed this demand. China’s rising middle class is business model to a sharply focused expected to reach 550 million by 2023 and science-based consumer business and Cross Border Ecommerce (CBEC) allows solidified the foundations for our innovative international brands to reach this enormous anti-aging brands in key markets, such as market without the red tape for imported China, Korea and the US. We are now focused products. on anti-aging hair care, but our ambitions Our new Director of Asian Business extend beyond that. Our vision is to create the Development, Carolyn Heath, was responsible next generation of anti-aging products for hair, for the execution of the Chinese strategy skin and body that make aging a choice. for Akin (Haircare) and Dr LeWinn’s (Skincare) Our recently signed Asian master distribution and she is looking forward to the opportunity agreement with Ourui Health for the Jo-Ju® to build a global business for a scientifically and Lexilis® branded products is the result of validated hair loss brand. several months of negotiations. It is a marriage As we are closing a challenging year in 2020, between market leading science in anti-aging I would like to acknowledge the extraordinary hair care and a potent Asian social commerce job our teams in Sydney, Tokyo and Dallas have network. We will start receiving orders in early done during this year. I hope you enjoy this 2021, then manufacture specifically for these extended holiday edition of our newsletter. orders, given their magnitude. Maria Halasz Our deal with Ourui is truly transformational and it completes the foundation for our Chinese growth strategy. This deal complements the 2 A MARRIAGE MADE IN PREMIUM ANTI-AGING PRODUCT HEAVEN resumé when it comes to beauty; he was one of the founders of Red Earth, which was sold through 600 retail stores in 45 countries before it was acquired by Esprit in 2001. Other successful brands in Mr Ko’s stable include SkinVitals, the face masks sold in Sephora. Our intention is to start in China, where demand for hair loss products is rapidly increasing, then extend to other Asian countries. Hair loss is the second most common hair concern following closely behind dandruff. Traditionally a problem for the 40 plus age group, hair loss is now prevalent in the younger, 20 plus, generation of men. The predominant 9-9-6 lifestyle, work from 9am to 9pm 6 days a week, is taking a Steven Ko, Founder Ourui Health toll on not only the body but the hair of a new Cellmid, via its subsidiaries Advangen generation of ambitious Chinese. Limited and Advangen (Japan), Social commerce is more advanced and signed an exclusive master distribution digital technology is more widely adopted in agreement with Ourui Health China than almost anywhere else in the world. Management Limited for the distribution Live streaming by brands through WeChat and of our Japanese, Jo-Ju® and Lexilis® instant purchasing capabilities are features not branded, anti-aging hair and skincare easy to replicate. China’s imitation economy products. has been well and truly transformed into an This is the first international distribution innovation economy, and nowhere else is agreement where two of our subsidiaries, this more evident than the almost 500 million Australia and Japan, will be working closely middle class consumers expected to purchase together on executing a single project. premium goods by 2023. Marketing support will be run from Australia, The key parameters of the Ourui agreement whilst manufacturing will be done in Japan. include a ten plus ten year term, minimum Steven Ko, the founder of Ourui Health annual purchase order requirements and Management Limited, is a serial beauty standard FOB payment terms. We will actively entrepreneur. His most recent success story is support Ourui’s marketing, but they will be Pearlosophy, a natural skin care brand using responsible for funding campaigns and pearl extract, which is sold in China through supporting their existing social network in the social commerce. The brand is now in its fifth marketing process. Revenue from the deal year and has been enjoying exponential will commence in early 2021 with full impact growth since its launch. Mr Ko has an impressive expected in FY2022. 3 GROWING APPETITE FOR NATURAL, FUNCTIONAL COSMETICS IN CHINA Here we list six reasons why we are 3.CBEC and the rise of Japanese and Australian focused on the Chinese market for our brands évolis® Jo-Ju® and Lexilis® hair loss and anti-aging hair care brands Cross Border ecommerce (CBEC) allows international brands to reach this enormous 1. The sheer size of the market market relatively cost effectively and without The Chinese market is enormous and hard to the red tape inevitable for imported products. put into perspective. China’s population of Brands can sell without going through the 1.4 billion is equivalent to the population of rigorous process and expense of filing for import North America, South America, Australia, New permits and government approvals. Japanese Zealand, and all of Western Europe combined. brands, especially cosmetics, rank as the China’s rising middle class is expected to reach number one in consumer preference in China. 550 million within the next two years, which is Japan is known for its innovative, high-quality 1.5 times the size of the entire US population. products and superb cosmetic formulations A small slice of the Chinese market can be designed for the Asian market. Australia comes significantly larger than the combined US and in as the 4th most popular country when it European market for the Jo-Ju® and Lexilis®. comes to preference for international brands. 2. The impact of the one child policy and the Known for its clean and green environment and rise of consumer led demand high manufacturing and regulatory standards, categories that are popular include beauty, Unlike their parents the results of China’s one baby care, health and wellness, food and wine. child policy of Gen Z’s and Millennials have grown up in the world of selfies, social media, 4. Chinese obsession with youth, beauty and influencers, and ecommerce. With six sets of luxury brands doting parents and grandparents, they do Chinese women are well educated in beauty not need to save for a house and have a high and start early, buying into anti-aging skincare disposable income to buy goods and services. well before their western counterparts. Beauty The internet has not only connected China to is very important for social status, obsessively so, the rest of the world, but their technology has and using luxury brands or expensive products overtaken the USA and Europe and helped is a way to demonstrate wealth and prosperity. China pivot from a production led economy to Chinese are ‘new consumers’, and as a result, a consumer led economy. they tend to prefer higher-priced items because of their perceived better quality. 4 ® ® ® BusinessIncomingBusiness Development development Manufacture Activities activities - évolis , Jo-Ju , Lexilis Product Number in manufacture Due Sachet Promote Mask 10mL 35000 Dec early Sachet Promote Shampoo 10mL 35000 Dec Sachet Promote conditioner 10mL 35000 Dec Travel size Shampoo Reverse 60mL 8250 Dec Travel size Conditioner Reverse 60mL 8250 Dec Travel size Mask Reverse 30mL 3645 Dec Travel size Activator Reverse 5mL 20000 Feb Travel size Shampoo Promote 60mL 8250 Dec Travel size Conditioner Promote 60mL 8250 Dec Travel size Mask Promote 30mL 3645 Available Travel size Activator Reverse 5mL 20000 Feb Promote Mask 150mL tube 5000 Feb/Mar Reverse Mask 150mL Tube 5000 Feb/Mar Existing distribution Business development activity 1 A survey by OC&C (Chinese research agency) 20-40 showed that, after dandruff, hair loss found that 58% of Chinese people claimed that is their most common hair concern. Young they want a more expensive product, while Chinese men start experiencing hair loss 36% of Chinese consumers upgraded to more much earlier than before perhaps due to an premium brands when possible. Of the Chinese increasingly stressful work life and environmental beauty consumers, 39% cited better ingredients factors. They also become aware of hair loss and better functionality as the key reasons for earlier and their focus is much more intense their switch to premium brands. given the pressure of looking great. Finally, the concept of prevention is much more accepted 5. The biggest shopping event in the world: in the Chinese culture as an essential tool to 11/11 maintaining youthful looks, including skin and The recent 11:11 shopping festival which now hair. extends over 11 days resulted in US$74.1 billion sales (gross market value) almost doubling News flash from last year’s $38.4 billion. On Tmall Global (CBEC) alone 26,000 brands from 84 countries Our évolis® Tmall store was offically opened participated. Almost 800 million Chinese on 22nd December 2020. Featuring our évolis® shoppers snapped up over A$1 billion of pharmacy products which are listed on the Australian goods during the first 24 hours of the TGA, the store is fully operational and has world’s biggest shopping event.