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Else Nutrition
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== Sensitivities == Else’s key sensitivities include: * Input cost inflation, both for the raw materials it purchases and for its packaging. * Reputational risk, which is particularly high in the infant nutrition space: product standards are very high and any product imperfection or contamination could lead to a recall, which would not only be costly in the short term, but also damage the brand in the longer term. * Supply chain risks exist as Else uses contract manufacturers, having chosen to remain as asset-light as possible. * Regulatory risks, as infant nutrition is a highly regulated segment. Else has to run clinical trials to demonstrate its infant milk formula is a safe and suitable alternative to human breast milk and other existing products. These can be lengthy and expensive to conduct and as Else embarks on geographic expansion, different regulators may demand additional data and trials. Else has referred to ongoing delays in the reviewing process by the FDA and other regulatory agencies, primarily caused by the pandemic and the resulting closure of testing laboratories and the imposition of restrictions. * Brand recognition, as Else is operating in a space with many well established and much larger branded players. * As Else expands and rolls out its product to new stores, there is the risk of being delisted if the product does not satisfy the retailers’ stock turn and margin requirements. * Accounting risks: Edison notes the FY21 financial statements contain a key audit matter relating to the valuation and existence of inventories. The auditors considered it a key audit matter given the magnitude of the inventories balance and the large number of inventory locations. In addition, Edison notes that both the FY20 and FY21 financial statements contained a statement by the auditors regarding material uncertainty as a going concern. This is due to the start-up nature of the business and hence the auditors state that the group’s ability to continue as a going concern is dependent upon its ability to generate product sales and ultimately attain and maintain profitable operations.
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