Biome Australia to Commence Domestic Production of Activated Probiotics Range

Biome Australia (ASX: BIO) has signed a commercial manufacturing agreement with Specialty Probiotics Australia (SPA) for the domestic production of its Activated Probiotics range.

The binding agreement forms the first stage of Biome’s strategy to take greater control of its supply chain, and will see the company progressively transition its manufacturing processes to Australia, adding a locally made and competitive advantage as it continues to scale internationally.

Biome expects the move to onshore manufacturing to result in smaller, more frequent batches while reducing inventory holdings, improving stock turn, and removing the extended international freight lead times currently associated with each production run.

This will in turn, reduce capital tied up in inventory and in-transit stock, while improving the usable shelf life of finished products before they reach customers.

The switch to onshore manufacturing is forecast to lift Biome’s gross margin from the first commercial batch targeted for September, with the full range scheduled to transition over approximately 18 months subject to commercial scale-up.

Meaningful Point of Difference

Local manufacturing will provide Biome with a meaningful point of difference across key export markets, particularly with consumers and practitioners who value product origin and quality standards.

Biome has confirmed it will retain its European manufacturing partners to continue servicing regional markets, providing supply chain diversification and offering greater optionality and flexibility as the company scales the Activated Probiotics range.

Biome founder and chief executive officer Blair Vega Norfolk said domestic manufacturing had formed part of the company’s long-term strategy.

“This move has been under consideration for more than two years and represents phase one of our journey to take greater control of our supply chain, manufacturing inputs, and product intellectual property,” he said.

“As one of the cornerstones of our Vision 27 ITALS strategic plan, we are pleased to begin onshoring with SPA while continuing to assess further manufacturing opportunities over time.”

Improved Gross Margins

Biome chief financial officer Lauren Dwyer said the move would deliver improved gross margins.

“Our current gross margin of 61% is already strong and has been delivered without a single retail price rise since we launched Activated Probiotics in 2019,” she said.

“We believe this partnership will lift this margin to more than 65% over the next 18 months as we transition to Australian production.”

“This will be achieved while reducing the working capital tied up in larger inventory orders as well as inventory in transit, and importantly, without any capital expenditure from Biome, allowing us to capture these benefits while maintaining a disciplined approach to the balance sheet.”

“Biome and its Activated Probiotics brand are among the most exciting, high-growth brands in the Australian—and, increasingly, global—markets, and we look forward to the journey ahead together," SPA chief executive officer Craig Silbery added.