Strategy and trading update

RNS Number : 1981C

Cellular Goods PLC

21 February 2022

 

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014, as retained as part of the law of  England and Wales. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Press release

21 February 2022

Cellular Goods PLC

('Cellular Goods' or 'the Company')

Strategy and trading update

Product launch on Amazon Marketplace

Board change

Cellular Goods (LSE: CBX), a UK-based wellness brand providing premium consumer products based on lab-made cannabinoids, provides the following update on its strategy and trading since the soft launch of its inaugural product ranges on 1 December 2021.

Review of strategy

Since the appointment of Anna Chokina as Chief Executive on 6 December 2021, the Company has conducted a comprehensive review of its strategy and go-to-market plans. Drawing on Mrs Chokina's more than 20 years' leadership experience in the global consumer goods sector, the review's key conclusions are that:

·	The Company continues to have a significant market opportunity to establish a differentiated and premium British wellness brand focused on lab-based cannabinoids with scientifically proven efficacy, legally compliant provenance and environmentally sustainable ingredients.
·	Cellular Goods will exclusively focus on wellness products across its three market verticals, namely Look Better (skincare), Feel Better (supplements) and Function Better (recovery).
·	Good progress was made to develop, create and soft launch a range of high-quality products last December. However, initial sales of the inaugural products have been below internal forecasts, principally due to market challenges that are being addressed with remedial action, as discussed below.
·	Based on the strategic review, Cellular has accelerated its retail partnerships and is pleased to open sales of the Company's Look Better range on Amazon Marketplace on 21 February, the biggest online retailer in the UK.
·	The Company's marketing campaign has begun, and activities in February have included the release of a white paper highlighting the age prevention benefits of cannabigerol (CBG) and cannabidiol (CBD) in skincare; consumer public relations has seen Cellular Goods' products endorsed in Marie Claire and Metro; and the use of influencers to promote the products. The full-scale marketing campaign will commence on 1 March, timed with the release of the serum. This will be expanded to include an outdoor campaign in the second quarter of 2022 and supported by a strong digital campaign as well as an influencer push.
·	The Company's face serum product will go on sale on 1 March 2022, supported by a broadscale media campaign. The Rejuvenating Cannabinoid Serum is the first and only such product in the UK that uses CBG, scientifically proven to have amazing ageing prevention properties. The campaign will drive awareness not only of the new serum product but of the Cellular Goods brand in general.
·	Four more products are expected to be launched during 2022.

Trading update

On 1 December 2021, the Company introduced an inaugural wellness range of five Feel Better and Look Better products, less than a year after its IPO and towards the back end of its planned launch timeframe. The soft launch, which was developed and implemented before the arrival of the new Chief Executive, was intended as the precursor to a full-scale marketing launch in February 2022. It was also aimed at introducing the Cellular Goods brand and the Company's product proposition to consumers, as well as to gather valuable market feedback to inform future promotional activity and new product development.

Although the Company has gained a highly encouraging customer response, with a returning customer rate of almost 60% and a 4.7 out of 5 average product rating on independent consumer reviews, total revenues have been below internal forecasts.

The Company has identified various factors that negatively impacted sales, including a policy decision by some of the world's largest social media companies. Google, and Meta's platforms Facebook and Instagram, prohibit advertising cannabis-derived products, which has prevented the Company's products from being promoted there. Cellular Goods' products are entirely based on lab-produced cannabinoids, are not derived from the cannabis plant and do not contain any illegal compounds such as THC. The ban severely constrained the Company's ability to promote its products to consumers, affecting sales.

In response, Cellular Goods has made significant changes to the media mix for its upcoming marketing campaign to work around the limitations imposed by these platforms. These changes required an overhaul of the original campaign and took time to implement, resulting in a deferment of the full marketing launch. The Company continues to lobby Google and Meta for a change in their policies.

Other factors that impacted sales included the anticipated delay in the launch of the face serum and a decision to pause sales of the After-Shave Moisturiser after some batches did not conform to Cellular Goods' quality specifications.

The Company's cash and cash equivalent balances were £7.73m as at 18 February 2022. The Company has no long-term debt.

Product launch on Amazon Marketplace

Commencing on 21 February, Cellular Goods' skincare products will go on sale for the first time on Amazon Marketplace as part of a pilot programme that enables selected cannabinoid products to be purchased through the platform in the UK. The Company is also in talks with Amazon to expand the pilot to its Feel Better (ingestibles) range.

A direct relationship with Amazon will broaden the Company's ecommerce channels and expand its reach as there is significant consumer demand for cannabinoid products in the UK, according to proprietary data from Amazon.

Board change

Alexis Abraham, who founded the Company in 2018 and served as Chief Executive Officer from its IPO in February 2021 until December 2021, will step down from the Board on 28 February and will become a consultant to the Company on an ad-hoc basis.

Anna Chokina, Chief Executive of Cellular Goods , commented: "I have reviewed the Company's long-term strategy and strengthened its marketing plans in readiness for our big sales push which is ready to go live imminently. As a result, we are now more consumer focused and will be more aggressive in building our revenue base and market presence.

"I am convinced there remains a major market opportunity to establish Cellular Goods as a premium British wellness brand. That said, much work needs to be done to execute this strategy effectively and realise our vision. Although it will take time for results of the actions we have implemented to become evident, I look to the future with great optimism."

The Company will report its half-year results for the period ending 28 February in late May 2022.

For further information please contact:

Cellular Goods
Anna Chokina Chief Executive Neil Thapar Investor Relations	via Tancredi [phone] [phone]
Tennyson Securities
Corporate Broker Peter Krens	[phone]
Novum Securities
Corporate Broker Colin Rowbury Jon Belliss	[phone]
Tancredi Intelligent Communication
Media Relations Helen Humphrey Gabriela Amaya Garcia Edward Daly Charlie Hobbs [e-mail]	[phone] [phone] [phone] [phone]

About Cellular Goods PLC:

Cellular Goods is a UK-based wellness company that provides premium products based on lab-made cannabinoids. It was established in August 2018 to develop efficacy-led and research-backed cannabinoid-powered wellness products. The initial focus is on three product verticals: Function Better, Feel Better and Look Better. These three verticals encompass Cellular Goods' premium CBG skincare and CBD ingestible and topical athletic recovery products, with the first products launched in December 2021 initially through the Company's website. The Company's shares are listed on the main market of the London Stock Exchange. www.cellular-goods.com  

 

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