Do You Have a Quiet H.E.R.O. In Your Portfolio Protecting & Fighting For You? [Nordic Global Leader in Animal Dental & Oral Care Premium Natural Products]
"What the world needs now is a quieter breed of hero, one actively fighting for a world in which rescues are no longer required." - Dan Heath
In his insightful book Upstream: How to Solve Problems Before They Happen that drew on insights from hundreds of interviews with unconventional problem solvers, Dan Heath shared that so often in life, we get stuck in a cycle of response. We put out fires. We deal with emergencies. We stay downstream, handling one problem after another, but we never make our way upstream to fix the systems that caused the problems. The police solve crimes, doctors treat patients with chronic illnesses, shelter is provided for the homeless. But we would all rather live in a world where crimes are not committed, diseases do not develop, and people do not lose their homes. So why do our efforts skew so heavily toward reaction rather than prevention? The need to prevent problems is perennial in our professional and daily lives, and we have the capacity to solve some of our thorniest issues - if only we start to think about the system rather than the symptoms. If only we start to think upstream.
Heath illuminated the vision that the world needs a quieter breed of UPSTREAM hero. UPSTREAM business models and strategies have also forged the enduring and exponential growth trajectory of our quiet H.E.R.O. innovators.
Case Story: Nordic Global Leader in Animal Dental & Oral Care Premium Natural Products
[Week (21-25 Sep): +34.6%]
Another UPSTREAM story in our portfolio companies in the Fund is Nordic global leader in animal dental & oral care premium natural products, which is up 45.6% since the inception of the Fund on 28 August 2020, versus MSCI ACWI World index/NASDAQ -5.1%/-6.7% over the same period. The rising dividend-yielding company has also compounded 1,133% in capital gains in the recent 5 years vs MSCI ACWI World index +42.9%. Following a game-changing strategic acquisition of an American pet health company specializing in dermatology products that was completed on 1 July 2020, the company announced on 24 September 2020 the acquisitions of British and American pet health companies: (1) Britain’s leading ”exclusive-to-vet”-concept in a comprehensive and unique product portfolio of nutraceuticals in the premium segment for pets with more than 2 200 veterinary clinics and animal hospitals as direct customers, including a comprehensive cooperation with Europe’s largest veterinary care provider comprising an expansive network of clinics, hospitals and out-of-hour centers based across 11 countries; (2) One of the leaders in the veterinary market in the US who sells a wide range of products to approximately 8,500 veterinary clinics. The product range, which is developed in house, covers a number of therapy areas of which dermatology and grooming stands for almost 60%.
The UPSTREAM story of the company begins in the 1970s, when the Swedish dentist Dr. W accidentally discovered that one of his patients, who had previously suffered from chronic tartar formation, suddenly showed a greatly improved oral health. The obvious change amazed Dr. W who decided to figure out what had caused the plaque and tartar to disappear. After doing some research, Dr. W realized that something new in his patient's diet was keeping the tartar in check. Finally, the dentist managed to track down the therapeutic ingredient, which turned out to be a special type of algae that his patient had eaten regularly. In 1999, Dr. W and his colleague came across a dog in Swedish Lapland whose dental health had been positively affected by a pet food which contained the very same marine algae. Dr. W and his colleague went on create the company. Together with dentists and veterinarians, they conducted a number of pilot studies on humans and pets in Sweden. The company holds a patent for the use of the special algae for oral and dental health. To achieve maximum effect, animal safety and minimal impact on the environment, the main ingredient is harvested from specially selected sites along the Atlantic coast of Norway - beyond the Arctic Circle, in one of the cleanest places on earth. To achieve the highest quality, the algae is harvested by a uniquely developed processes and with advanced technology and equipment that leaves the environment totally unaffected. The company, together with the supplier, has developed a postprocess that has resulted in a product with the greatest possible effect on oral health.
CEO Mr. L commented: "In most markets, online shopping has increased strongly during the quarter as physical stores have had limited opening hours, and that there have been several restrictions for consumers to move around in the community. Our already largest customer in the US, Chewy. com, had a record quarter and accounted for over 30% of our sales in the US. Our increased market investments in the US have yielded results, we increased our sales by 28% compared to last year. During the quarter, Amazon UK continues to increase significantly, both for the reason of the expanded online initiatives and closed waiting rooms at the veterinary clinics. As for other subsidiaries, we had record months in both Spain and Greece in June, which resulted in a quarter of increased sales in these markets. The Nordic region also closed strongly and increased its sales by almost 50% compared to last year. Asia and Rest of the world were slightly weaker, but China is back, and we see that the second half of the year will be stronger in 2020 as we have reviewed both orders and forecasts. It feels like the world is waking up and trying to return to how it was before.”
"We managed to complete the deal on July 1st, an acquisition that changes the future of our company, a so-called 'game changer', in my opinion. With the acquisition, we will have a channel to cover 10,000 veterinary clinics, many of whom are not customers of ours today, and we will have a business and management team that will not only develop the acquired company as a subsidiary but also contribute to our growth worldwide. The acquired company also has an interesting product range that complements and expands our range in various parts, of which their dermatology products will be particularly interesting to launch in our distribution network worldwide. Finally, the acquired company has built a unique process where they can deliver private label products to individual clinics that want their own label on their products. Without synergies and sales partnerships, as we see coming, the acquired company also had an extraordinarily strong first half year with a large increase in sales and they, like us, can see that this continues in the third quarter. Therefore, their contribution to our company will be clearly visible in our next quarterly report, which I am of course already looking forward to presenting! To finance the deal and continue to have a strong financial base, we chose to carry out a directed new share issue to new and existing institutional owners. The interest was fantastic, and we welcome several new extremely reputable owners. The great interest gives us the confidence to continue to see how we can best make new steps to approach our goal of becoming the leading dietary supplement company in the world focused on pets.”