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Ecoya bets it can grow a fragrant global brand after directors' success with vodka

Wednesday 31st March 2010

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Ecoya's initial public offering to fund its global expansion in the home fragrance and body and bath products markets is partly a bet on the crew that successfully brought the 42 Below vodka brand to market, says executive chairman Geoff Ross.

Ecoya, which makes its products in Sydney and has a head office in Auckland, is seeking to raise $10 million to drive sales of its scented candles and natural fragrances in Northern Hemisphere markets.

“It’s partly a bet on a fast start,” said Ross, who along with other Ecoya partners, founded the 42 Below vodka brand that went global and was sold to Bacardi for $138 million in 2006. “Ecoya isn’t a start up. It’s had a 100% a year growth trajectory for the past three years. It’s a bet on the board who collectively have pulled a string of successes together.”

The home fragrance and body and bath categories are already growing and that’s a plus, “as it’s better to have a natural tail wind with you rather than having a head wind,” he said.

Former 42 Below members with daily roles at Ecoya are executive director Grant Baker, CEO Craig Schweighoffer who runs the manufacturing site at its Botany Bay, Sydney site, and CFO Stephen Sinclair. Independent directors for the producers of “affordable luxury” are leading Australian fashion designer Collette Dinnigan, American west coast film and television producer Rich Frank and Air New Zealand CEO Rob Fyfe.

Like 42 Below, which was the first southern hemisphere entity to take a spirit to global distribution, Ross is betting on Ecoya’s southerly credentials to play to a similar emotional appeal.

Consumers are increasingly creating a new ambiance in their homes, with potential for natural ingredient, environmentally friendly products in what is a growing market he said.

There’s no solid Australasian businesses in the home fragrance or body and bath brands, “there’s a few ma and pa operators, as well as other typically northern hemisphere players,” he said. “But they’re a bit old worldy and European compared to us. People find brands from the new world exciting, more interesting. There’s a huge amount of value in creating a brand with an Australasian provenance and origin.”

Ross said Ecoya’s success won’t just be about marketing. “The battlefield is brand and distribution, and that’s where you have to win,” he said. “Not all New Zealand businesses tend to hold out those as major fundamentals.”

In its prospectus, Ecoya forecasts 2011 earnings of $8 million, up from an estimated $3.9 million in the 12 months ending today. That’s based on an anticipated average gross margin of 49%, as Ecoya expands beyond its Australasian base and Shanghai start to enter the US market in earnest.

Ecoya is issuing 10 million $1 shares, 2.5 million of which will be allocated to the independent directors and certain private investors known to the directors.

Ross said while the company may eventually list on the Australian stock exchange, Ecoya’s relatively small cap and the directors’ knowledge of the New Zealand investment community and professionals make a domestic IPO more attractive.

The credibility created by a public offer should also greatly assist in the acceleration of Ecoya’s business plan and recognition of its brand he said.

The share offer closes on April 26, and has an oversubscription pool of 3 million shares.

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