Calmer Co International [ASX: CCO]
Household & Personal Products
Commercialising Kava in a big way
The Calmer Co. (ASX: CCO) is a vertically integrated kava producer that focuses on the development of high-quality Fijian kava products. Operating through three major brands – Fiji Kava, Taki Mai, and Danodan Hempworks — it distinguishes itself as the only professionally managed company within the kava industry, lauded for its comprehensive supply chain management, extending from farm to shelf. With a diversified portfolio, the company is embarking on a strategic shift towards rebranding its product as a functional beverage, seizing the opportunity within the natural product segment.
Poised for a turnaround by a transformative distribution strategy
Aiming to establish a profitable sales network, the company has undertaken a strategic transformation in its distribution approach. CCO has formed multiple partnerships with leading distributors, dominant retailers, and direct-to-customer channels, reflecting a comprehensive approach to expanding its presence across markets. The new collaborations aim to capitalise on the strengths of each partner and create a synergistic plan for sustained growth and increased market penetration. Furthermore, CCO is actively adapting to the shift in consumer purchasing habits towards e-commerce. The company is aggressively expanding its visibility across various online platforms to align with this trend. These strategic shifts in sales channels are anticipated to support CCO in developing sustainable growth.
Reprofiled kava products have multi-dimensional end markets
CCO has been repositioning its kava brands as functional beverages. This is in contrast to their former positioning as a health-focused dietary supplement. Consequently, the rebranding has opened multiple end-market opportunities, including direct sales to kava bars, bulk kava sales for branded nutraceutical food products, pain relievers for sportspersons, sleep disorder supplements, etc. The scientifically proven utility of kava as a health product and the establishment of the rebranded portfolio is expected to provide CCO with the scope to target a bigger market opportunity.
Valuation range of A$0.013–0.017 per share
Using the DCF methodology, we have calculated CCO’s intrinsic value to be A$0.013 per share in our conservative base case scenario and A$0.017 per share in an optimistic scenario. We have assumed the required share dilution impact from ongoing capital raising program. Multiple modes exist for shareholder value creation, including the rebranding of kava products as a nutraceutical beverage, commercialisation success through e-commerce platforms, and operational efficiencies from the new distribution channel partnerships. Main risks to our target price include supply chain disturbances and uncertainties surrounding regulations.