Honey money

Published September 3, 2010 @ 3:05 pm

Any company with a healthy balance sheet in such sickly economic times must have a secret tonic.

For Comvita, exporter of natural health products, the secret’s not just in the formulations and the effectiveness of its products; it’s also in its intellectual property, culminating in its brand. According to chief executive Brett Hewlett, Comvita’s brand premium gives it a 20 to 50 percent margin over its international competitors.

The result is a company that’s an exemplar of both export success and IP leverage. It has lifted sales by 19 percent in the past financial year and profits by 600 percent. Sales were nearly $85 million, up from $71.4 million the year before, and after-tax profits were $5 million compared with $770,000 the previous year.

Founded on a partnership

That’s a far cry from where the company started in Paengaroa in the Bay of Plenty, 35 years ago. Today, of the 260 people on the payroll, 110 are in New Zealand. More than 80 percent of its sales are overseas.

Comvita’s founders are Claude Stratford and Alan Bougen. Bougen remains a director of the publicly listed company, and this year Stratford turns 100, a living advertisement perhaps for the efficacy of the company’s products.

Stratford and Bougen built the business on the health-giving qualities of bee products, and were the first to export jars of manuka honey. Manuka honey is still at the centre of the business, which continues to sell honey-based and other therapeutic foods and honeybased skincare products and wound dressings.

In 2006 Comvita signed a licensing agreement for the Americas with US company Derma Sciences, which expanded into a global license agreement this year, taking a 16.7 percent stake in the medical products company and expanding in Asia.

“We like to think we’re not just an export company but an international company because we do some of our product manufacturing in Australia and we own much of our own channel and route to market,” says Hewlett.

Maturing market

If health is the new wealth, another ingredient of Comvita’s business-boosting cocktail is the ageing population. The company’s products, including propolis and olive leaf and broccoli extracts, contain antioxidants that combat the cell and tissue damage caused by free radicals that becomes harder to disguise with advancing years.

Increasing health-consciousness is an external factor that Comvita is cashing in on. But to be able to continue to do so depends on adding to and protecting its stock of intellectual property.

The company is careful to support the claims it makes for its products with scientific data. It also expends effort on manuka breeding programmes to extend its access to greater volumes of the important raw material.

IP wealth

A key element of its ongoing success is safeguarding its intellectual property—the trade marks, product formulations and brands that it has developed. Corralling all of those assets entailed a steep learning curve for the company, says Hewlett.

“We’ve really had to upskill on managing intellectual property— everything from trademarks to label devices, all the way through to patents.”

When Comvita acquired patents as part of the purchase of honey producer Api-Med in 2003, it realised it had to take a more businesslike approach to IP protection. The need has become even greater, as the company now owns more than a dozen patents and has more in the pipeline.

“We’ve gone from managing it at arm’s length through our patent attorneys to now having an employee who looks after all our intellectual property. We also have a specialised agency that looks after trademarks, and A J Park, which looks after our commercial licensing agreements and any defence or litigation around our patents.”

It may not appear obvious that food-based products are patentable. But A J Park senior associate Jo Shaw points out that “inventions” that combine common ingredients in innovative ways can indeed be patented. That doesn’t stop them being challenged, however. One of Comvita’s patents was being put to the test in a case the company was bringing in Britain—“The first time we’ve had to flex our muscles,” says Hewlett—with A J Park’s help.

Being assertive of intellectual property rights and vigilant against infringements are crucial, he says.

“So far we’ve done it well but it’s been a 35-year learning curve. The important thing is to learn from others’ mistakes—have a look at how companies that have already been down the same path have approached things.”

When other outfits are flagging, it’s another of the secrets to how this healthcare products company stays vigorous.

Contact

A J Park, Phone 0800 257-275
www.ajpark.com

Comments

Zenetics

September 8, 2010 @ 3:47 pm

A IP issue is how to determine value. Sometimes infringements of IP law are actually to your benefit. Obvious copying —that screams “RipOff” often reminds the consumer where real value lies. And outright theft can occasionally contribute to sales. Take downloads of movies and music. As it turns out, downloaders actually BUY more than non-downloaders. Let's say, a downloader downloads an album, Electric Crotch. He likes it —and goes out and buys a few CDs. And he tells his friends — many of whom don't like pirate software. They but it too. Downloaders are enthusiasts. Windows dominates the global market. Why? Because everybody uses it. And if they all had to buy it? Might as well move to Linux. (might as well move anyway)

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