(MENAFN- ProactiveInvestors - UK) Nestled in the crater of an extinct volcano in South Africa's Mpumalanga Province lies the Senteeko tea estate. Lush expansive crops are tended by local workmen as freshly harvested tea is processed in the plantation's onsite factory.
But when Plandai Biotechnology (OTCMKTS:PLPL) took on the Senteeko tea estate back in 2012 its tea plants dwarfed vice-president Callum Cottrell-Duffield a man well over six feet tall.
'In some places the plants reached a staggering 30 feet and the whole area required a lot of work as tea plants for harvesting tend to be around two feet high' he explained.
'Bringing a tea estate back to life is not an easy thing.'
The team embarked on a massive turnaround project to cut the 2000 acres of tea down to size and restore the overgrown and neglected plantation to a functional community-led operation.
Plandai secured a US$7mln (R100mln) loan from the Land & Agriculture Bank of South Africa which enabled them to work with the Shamile Community who owned the land. Plandai secured a 49-year notarial lease for the farm which enabled them to create a thriving stable community in partnership with the locals.
In 2005 South Africa lifted its tariff protection on imported tea causing the overnight collapse of the industry and the abandonment of much of the tea producing estates in the country. Naturally when Plandai took on the estate the team faced much local scepticism.
'Tea is not a profitable business in South Africa any more you can't compete with the other well established markets in the region' said Cottrell-Duffield. 'But we don't just sell tea.'
Instead Plandai's business model focuses on not just growing crops but on producing highly bioavailable nutraceutical extracts onsite using its patented processing technique.
Bioavailability is the amount of the active ingredient that makes its way to the blood and therefore can be used by the body's cells. In the case of the beneficial antioxidant catechins found in green tea only a small fraction (between 1-10%) is absorbed from most standard extracts.
Independent research has shown that catechins can aid in the prevention of cell degeneration and related diseases such as cancer and heart disease as well as aiding weight loss and overall well-being.
With Plandai's green tea-derived Phytofare however the level of bioavailability is ten times greater far exceeding other products on the market. In fact all eight catechins are found in Phytofare whereas most other extracts only have two.
Human clinical studies undertaken by North West University South Arica confirmed that an oral dosage of Phytofare catechins was efficiently transferred into the blood stream when compared with conventional green tea products which were mainly destroyed before entering the blood stream. Further these tests confirmed that Phytofare remained in the blood at therapeutic levels for over 24 hours whereas catechins from generic extracts had been largely eliminated after only four hours.
In fact Plandai believes that Phytofare is the only wellness product backed by a statistically significant human study to prove the increased bioavailability.
Looking at the stuff itself the difference is clear. Compared to regular green tea extract Phytofare is a fine emerald-green powder similar in appearance to high-quality Japanese matcha but with greater bioavailability and higher levels of phytonutrients. Regular green tea is brown losing its green colour and most of its anti-oxidant properties through traditional harvesting and preparation processes.
Plandai's patent-pending processing techniques are kept firmly under wraps with a water-tight IP. The company's current model consists of selling the Phytofare extract to a combination of finished goods producers who then formulate it in their own products and formulas and distributors who sell it on to manufacturers.
Cottrell-Duffield explained: 'Our customer is a manufacturer who produces a branded product that incorporates Phytofare as an active ingredient. This strategy enables us to capture market share quickly without incurring the costs and delay of building a large in-house sales force or attempting to break into the consumer market with a private-label Plandai product.'
The global wellness market is expected to be worth around US$20bn and Plandai holds an exclusive breakthrough product so what's holding it back?
'The first several years have been challenging' admits Cottrell-Duffield. 'We had to rejuvenate an abandoned tea estate rejuvenate housing for hundreds of workers and then engineer and construct a 100000 square foot extraction facility - all of which took place at a location 20 miles from the nearest tar road.'
On top of that last year just when the company had commenced manufacturing a freak hail storm destroyed most of the final tea crop last year. Production then shut down for the dry season and only reopened in October.
'There's no doubt we experienced the typical teething issues expected from any new company but everything is up and running and production is up every month along with sales' added Cottrell-Duffield.
Current output at the plant is around a tonne per month which will the group hopes to continue through the end of the current production cycle. When the factory reopens in late September it expects to increase production up to 5 tonnes per month depending on the amount of tea leaf available for processing.
Revenue is expected to be around US$180000 a month by mid-year taking Plandai to profitability with 2017 production enabling the company to more than triple this amount.
Addressing the group's recent de-listing from the OTC Cottrell-Duffield said: 'we've had a spate of bad luck as it concerns retaining qualified auditors. Our auditors for each of the past three years have been forced to resign after losing their PCAOB certification the most recent of which occurred just as we were set to file our annual report for last year. This resulted in our having to retain a new CPA firm and undergo an extensive multi-year re-audit. While this knocked the share price a bit we are back on track and set to relist by the end of May.'
From a sales perspective Plandai signed an exclusive supplier agreement with Ultimate Sports Nutrition to use Phytofare in its products in South Africa Europe and Australia and North America. The Company has also partnered with UK health group Grenade which is launching a new product using Phytofare and is hoping to expand this relationship in the coming months to a worldwide exclusive supplier agreement.
Additionally the German group Vitamin Express is launching a new range of wellness supplements using Phytofare and Plandai has just shipped its first products to the US. The company recently contracted with AIDP a US-based firm with a global customer base to distribute Phytofare in North America and elsewhere around the world.
Plandai boasts an exciting research and development pipeline. Whispers that the company was entering the medical marijuana market propelled the shares price to over US$3 in 2014 but navigating regulations in the US became difficult and it was forced to shift its cannabis research overseas. In September 2014 Plandai was granted a licence in Uruguay by the Health Minister to research non-psychoactive cannabinoid medicines and conduct animal trials. But the company is currently in a holding pattern while Uruguay and other countries establish the controls and operating platform needed to permit the company to legally obtain research material.
'It can be done' said Cottrell-Duffield. 'If we do what we believe we can do it's a global market 100%. As soon as possible we plan to produce a cannabis extract and prove that we can make a non-psychoactive product that retains the medical benefits.'
The focus is very firmly on the nutraceuticals. So what's next?
At a time when medical bodies are warning of the dangers of growing antibiotic resistance particularly in farming industry Plandai is presented with a unique if unorthodox opportunity.
The company is currently completing the first stage of a clinical study with Phytofare involving chickens to demonstrate improved overall wellness and reduced mortality.
If all three phases of the trial are favourable then chickens fed a diet that includes Phytofare would show improved health and bone density enabling them to reach their ideal size and weight more quickly with lower mortality rates while supporting vaccines and antibiotics.
And in the poultry industry with a global annual market of 50bn birds improvements like this could have a significant impact on the bottom line for both poultry producers and Plandai.
The company is also researching applying its patent-pending extraction technique to another medical plants and is in various stages of development. On the list are various citrus fruits which are high in beneficial limonoids and bioflavonoids epimedium which is potentially a natural substitute for Viagra artemisia for malaria and tomato for the carotenoids. The first goal however is to increase sales of Phytofare Catechin Complex over the coming year.
An AIM listing could well be in the pipeline which Plandai is considering but given the company's current position this will be at least another 24 months down the road.
The direction Plandai seems to be heading in is far removed from the untamed jungle whence it emerged.
This content was provided by Plandai Biotechnology
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