Cellular Goods PLC (LSE:CBX) reported its first revenue after launching its debut consumer skincare and ingestible products in the first half of its financial year.
Chief executive Anna Chokina said she has “sharpened and focused” the lab-based cannabinoid group, which was the first of its kind to list on the London Stock Exchange in early 2021, since she joined at the end of last year and is “satisfied that we now have the right products, strategy and potential to establish the company as a premium UK wellness brand”.
This includes the launch of initial ranges on its own web platform and the February introduction of the Look Better skincare product range on Amazon Marketplace in the UK, alongside an ongoing brand building and consumer education campaign aimed at upscale audiences via online marketing, an outdoor marketing campaign, social media influencers and the publication of two white papers, with positive media coverage received in Marie Claire, Vogue, Men's Health, GQ and Metro.
However, while sales volumes and turnover in the second half are expected to ramp up from the first half, following new further product launches and marketing campaigns, it is likely to be at a slower rate than initially expected, the company said.
While these actions and investment in the business are expected to materially benefit Cellular Goods' prospects next year, with a “step-up increase” in annual sales anticipated, the company said it is being held back by “major headwinds”, including new rules introduced by the UK's Food Standards Authority, that have led it to temporarily suspend sales of its ingestibles products even though the product formulations are produced by, and identical to, those made by an FSA validated supplier Chanelle McCoy Health.
“The confusion and uncertainty caused by FSA policies is disappointing and we will continue to press our case to be allowed to sell our ingestible products,” Cellular Goods said.
Furthermore, online platforms such as Facebook, Instagram and Google have banned online advertising of cannabis-based products on their sites.
“As a result, the company believes it is being unfairly hampered from providing its high-quality products to the British consumer by policy decisions which do not reflect the robust safety profile of Cellular's products, or its exclusive use of lab-made cannabinoids which do not require the cultivation of the cannabis sativa plant and contain 0% THC, the psychoactive component of cannabis sativa,” it said.
“In the light of the current challenges, the management team faces the difficult task to strike a balance between managing company costs while continuing with investment in the business to deliver long-term growth.”
For the six months to 28 February 2022, the company reported its first revenues of £13,058, with a pre-tax loss of £2.4mln.
Chokina, who has 20 years’ prior experience at Avon, PepsiCo (NASDAQ:PEP) and other consumer goods companies, reminded that the "company is still in its infancy and based on my industry experience, establishing a new consumer goods company will require time and investment while managing our cost base.
“We are also facing significant headwinds to building growth momentum but the building blocks to improve our performance have now been laid.
“As a result, I expect the benefits of our strategy to become evident from next year when we expect trading conditions to normalise and our greater focus on brand-building and marketing to start paying off."