The almost instant sell-out of New Image Group's sleep-enhancing milk product in Taiwan late last year might at first glance be considered a bitof a fluke.
But that success with one of milk's 'good bits' had its genesis a number of years before when GuyWills and his colleagues commercialised a research project with an investment ready frameworkalready in their mind.
As a previous new venture/start-up creator, as well as a planned exiter (if such a word exists),Wills knew the development of any product had to tick a certain number of boxes.
"My view is that before any science R&D with commercial aspirations in mind starts, it shouldbe linked to a strong market and commercial proposition," he says. "If the business needs funding,it is then able to attract investment."
Some of the key requirements were:
•Is it something that could attract investment?
oIs the business desirable, does it havea 'wow' factor, does it have a clear and strong value proposition?
•Theright people involved
•Sustainable competitive advantage with an attractive and globalscalable business model
•The ability to 'shape up' a solid business platform
Dairy based products have been incredibly successful as health and functional foods he says. Theyalready have a strong association with sleep, sleep is a problem for up to 50% of the population,and the market itself is increasingly after natural solutions.
The product had a strong potential to hit the proven rules in functional and health beverages.There was an easily understood association of milk and sleep, it was natural-based, provided a clearbenefit that is a highly prioritised need Wills says. Consumers can feel the difference and it canbe delivered in tasty, convenient and novel formats.
From an investment point of view, whatever was to be developed also had to have a strongcommercial platform including IP protection, whose production could easily be scaled throughdifferent modes such as manufacturing, licensing or franchising.
The right team is vital "since it's all about execution, especially in the early stages," Willssays. "You have to be able to adapt, and self-correction is critical."
Having the right people to open doors, as well as provide good governance and ensure it is wellmanaged was another important aspect.
It's business model made it clear how the product was going to grow; again around a strong IPposition, proven product and scalable business model.
From these points of view the science that the then Somnaceutics Ltd. decided to pursue wasmarket driven (a pull) rather than a research push he says.
"We looked to link what the market and customer wanted and what we thought might work, anddirected our resources to the right area," says Wills.
From that fundamental basis capital was raised by shareholder partners Pacific Channel and in2007 Somnaceutics set about clinical trials and patent protection.
Obtaining commercialisation and expansion capital in 2009, Somnaceutics got the right peopleonboard, and about the same time entered into a partnership with the New Image Group, jointlyleveraging their capabilities.
"With any start up, you want to get a customer as quickly aspossible," Wills says.
The market validated that the sleep-inducing product would be well-received.
Late last year, using NIG's direct selling model in Taiwan through a raft of distributors whoidentified their own customers with sleep issues, the 'Sleeptime' product sold out very quickly.
"It was clear from that we had a multi-million dollar product on our hands," Wills says.
NIG's purchase of Somnaceutics' patents and intellectual property was in itself a natural movefor the NZX-listed company with increasing interests in the natural bioactive and nutraceuticalbusiness.
With its particularly strong distribution networks in Asia and the United States, NIG is theperfect vehicle to expand the product he says.
As well as tasting great, and being healthy and natural, the fact that New Zealand milk productsare regarded through Asia as being of high quality because they're from clean, green, pasture fedand safely produced sources says Wills.
"One of New Image Group's strategies is to have unique and proven products that leverage NewZealand's advantages to the world," he says. "This strengthens their portfolio, and they bought itbecause they believe it can be a significant part of their business."
'Sleeptime' is just one of the brands for the product, "one of many different executions."Sleeptime itself sells at retail level in Asia for about NZ$3 a satchet - less than the price of acup of coffee as Wills says.
Different partners and distribution routes can have different formulations, for example, a 'shot'or alterna
tively in a capsule. NIG intends phasing the release of the product, positioning itsvalue as a relaxing, nutritious bedtime drink.
"We can change the flavour profile, adapt it for different markets," Wills says. "For moretraditional markets for example, we might add Chinese herbs."
Wills says that in a sense, the unique set of benefits leaves very little direct competition forthe sleep-enhancing product. It depends on how competition is defined, especially from the point ofview of natural, healthy, efficacious, nutritious and enjoyable.
Some herbal concoctions have varying degrees of efficacy, and synthetic melatonin requires aprescription in many countries and not recommended for regular use.
More the point though is that the NIG product is natural, and can help as part of a nighttimeroutine.
"Ours is a significant opportunity," says Wills. "We can see the emerging trends towards naturaland functional products in the targeted nutrition areas such as mood, cognition, anti-anxiety,immunity and rejuvenation, and we're offering innovative and unique products in that space.