Australian cannabis product specialist Creso Pharma (ASX:CPH) has entered the giant Chinese market with the signing of a strategic partnership and commercial distribution agreement with Zhejiang Kingdom Creative Co., Ltd (Kingdom Creative).
Creso Pharma CEO and Co-Founder, Dr. Miri Halperin Wernli said the agreement provides Creso with a strategic foothold in China to be able to offer the Chinese a range of products from nutraceuticals to therapeutic and medicinal – both for human and animal health – and allows Kingdom Creative to vertically integrate beyond textiles and diversify into value-added, hemp-based nutraceuticals for human and animal health as well as cosmetics and age-defying beauty products.
Kingdom Creative, a subsidiary of Hong Kong- listed Kingdom Group, is an investment company with a diversified investment portfolio including retail businesses, banking, finance leasing and biotechnology companies. Primarily a hemp and flax-based linen production company, Kingdom Creative is located in China’s Zhejiang province. The company is involved in hemp cultivation and processing and is looking to expand its product offering into the healthcare sector using Creso’s expertise in hemp and cannabis-based nutraceutical and medical cannabis therapeutics and products.
Under the move, the two companies will collaborate on research and development as well as the distribution of hemp- and cannabis-based nutraceutical, cosmetics and body care products across China. Kingdom Creative will purchase and import Creso’s current and future innovative human and animal health hemp and cannabis-derived products and invest in marketing and distribution efforts to support the successful introduction and sale of these products into the vast local market.
Dr Wernli said Creso has also opened up offices in Beijing, Shanghai, Shenzhen and Guangzhou, giving it a sales and marketing presence and further local distribution options in China for its products. It will also enable Creso to rapidly expand into other Asian markets.
He said the Chinese health food market – which includes vitamins, dietary supplements and minerals, animal and herbal extracts and traditional Chinese medicine – is currently valued at RMB200 billion (US$30 billion; A$39.62 billion) and is projected to grow by 10 per cent every year between now and 2025.
China is the world’s largest producer of pharma ingredients and the world’s second-largest pharma market. It is projected to reach a staggering US$158 billion (A$208.73 billion) worldwide in 2016 and grow at a CAGR 7.7% between 2014 and 2019.ii Sales for medical cannabis in China are also expected to grow with China progressively opening up legislation to allow hemp-based and medical cannabis products to be available to patients.
Dr Wernli said Creso and Kingdom Creative will enter into a definitive agreement within three months of execution to further define the collaboration and commercial terms. This will include consideration of expansion into additional territories.
“This is a very exciting partnership for Creso as it gives us a strategic foothold in China and Asia. Our collaboration with Kingdom Creative offers a great opportunity to work with a well-established and substantial organisation in this market,” said Dr Wernli.
“At the same time, the opening up of four offices in major Chinese cities strongly augments this agreement and gives the partnership additional sales and marketing support and our own local distribution network. We will use this presence to expand into other strategic Asian markets.”
Creso is also in advanced discussions with other Asian pharmaceutical and cosmetic groups opening the path to bring Creso’s products and IP to Asia in a fast, effective and efficient manner to be able to reach a massive population of consumers and patients.