The Calmer Co International Limited (CCO) Q2 FY2026 Earnings Call Transcript & Summary

Matthew Kowal, our Chief Commercial Officer and myself will be going through our results with you all. Thank you, Matt.

Thank you.

So as we continue to communicate to our shareholders and partners, we speak to our strategic pillars across the Calmer Co's business, starting, first of all, with strategic Pillar 1, which is our regional sourcing, manufacturing excellence and innovation capability in the company. We speak to strategic Pillar 2, which is our direct-to-consumer, including Amazon. The third one is profitable, scalable retail, followed by wholesale bulk ingredients. If I can give you a bit of an oversight on some of the key progress across the strategic pillars, we continue to build strength with our regional sourcing strategy, having secured now multiple orders of container loads of Noble Kava out of Papua New Guinea, soon to be followed by Vanuatu. Further news around the opening of the borders as it relates to more regional supply into Fiji. During the quarter, [ SMO ] also has had success with biosecurity, opening up potential supply into the Fiji market as well, given the consumption in Fiji, but also given the fact that Fiji is now becoming a central hub in the Pacific for processing and subsequent export into strategic locations around Australia, New Zealand and the United States and in some instances, parts of Europe as well. We also currently this week have started the Kava Bill consultation with industry stakeholders. In fact, as we speak, there is a consultation with growers, processors and exporters at the Southern Cross Hotel in Suva, which our team are also attending. So this is very good news to have finally at this stage, consultation with stakeholders to move to a parliamentary review and final adoption of the Kava Bill, which is very meaningful for the Calmer Co, and the industry as it relates to a strategic framework and regulatory framework that we can work towards to ensure that we all comply with international standards as we look to build further export strength beyond U.S.A., New Zealand and Australia, potentially into the European market as well, which is a work in progress. The direct-to-consumer strategy, including Amazon is still a significant and the most significant channel in the Calmer Co's business as it relates to revenue contribution. We'll touch on this in more detail through the presentation. But Amazon U.S.A. and the contribution thereof is becoming very meaningful where U.S.A. now is the top geographic location for the company as it relates to revenue as announced in the quarterly results. The profitable, scalable retail, we continue to make very strong progress, and Matt will touch on this in detail during the presentation as it relates to expansion in Coles and continued growth since launching in Woolworths Supermarkets Australia-wide as well. I guess some of the discussion points I'll touch on is given the success of retail with our products here in Australia, the potential consideration and upside with us looking at retail in the United States as part of our next steps. Wholesale and Bulk Ingredients continues to show very strong growth across the business. We've come out of R&D in the quarter with confidence to develop a second site with a toll processing partner here in Australia to support growing demand out of the United States and elsewhere. Thank you, Matt. So as announced in the quarter, December was a sales record month for the Calmer Company. We finished December with $910,000 worth of revenue. U.S.A. sales was up 9% versus the previous quarter. And of course, this is supported largely by very strong growth across our wholesale channel as well. And I touched on earlier, U.S.A. now represents 51% split of total revenue for the group. Australian retail had a softer quarter, largely because of the Q1 FY '26 pipeline fill into Woolworths Supermarkets, which again, Matt will touch on in more detail. Thank you, Matt, and over to you.

I think you want to go a little bit more into detail on this one, Zane or do you want me to pick it up? Yes. So just a continuation then from what Zane was saying just regarding the U.S. and...

Just to continue with U.S.A. Yes, sorry, Matt, I think my Internet connection is not the best this morning, so keep going.

Yes. So just continuing on from what Zane was saying and really the emergence of U.S.A. from a sales volume last quarter, but really what it says about the opportunity moving forward across all categories. Obviously, Amazon already showing great opportunity for us and continued growth, particularly year-on-year numbers, very impressive. And we've made some key kind of steps in there as we'll talk a little bit later on in one of the slides in terms of building up that second brand with Taki Mai. But alongside that opportunity that we're seeing in online and Amazon is the emergence of wholesale, particularly obviously in the products that we've just brought to market with CO2 extracts and its suitability to the market as well as the growth of kava as an ingredient, not just into a complementary medicine, but into mainstream consumption has really seen immediate effect, but also what we can see in a short to medium opportunity for us as well. And that's also then the next step of the question that Zane touched on is how do we then explore what that means into a retail space, something we haven't done in the U.S., but it's something we're looking at with a great deal of detail to make sure that we execute well as we see the U.S. is such a huge opportunity for the business.

Yes. The other good news out of the U.S. for the quarter, Matt, was also the big announcement by the FDA on the regulatory front. So at the federal level, now Kava is regulated as a food. Just yesterday, there was some news that came through with California recognizing Kava as GRAS, which is generally recognized as safe. So this is another significant breakthrough given California is by far the largest state in the United States and very good news for Kava bars and Kava consumers in general in the United States. And aside from that, 10.7% of Americans have tried Kava more than once in the last 12 months. A majority have purchased Kava online, whether that be from us on Amazon USA or through retail Kava bars throughout the U.S.A., it is a very, very good news for the industry and for the Calmer Co.

Absolutely. Absolutely. Talking to retail and some of the comments that Zane made earlier, again, a really strong quarter, taking into account that Q1 was including a pipe fill into Woolworths, but also a pipe fill into Coles that has expanded our 150-gram range as well. So seeing that growth year-on-year, but also that trend across the year has been really positive. But then we've gained some new data directly from Scan to understand where we're sitting in the category. And as a stress subcategory, we're ranking #1 and #3 with our products at 50-grams and then the 50-grams. So incredibly strong reinforcement to what we're doing and showing the importance through the category and Kava growth in that retail space in general, contributing 33% of that subcategory. So the important part of that is it gives us an opportunity and platform for growth and talking with our retail partners. And that includes currently going through the range reviews. We've recently submitted into Coles in their process, coming in for a midyear change in 2026. I think the important part of that is not only the extension opportunities around our current powders, but the introduction of some new products that we are working on and importantly, in a flavored and also convenience space, which really is going to give an opportunity to build on what we've done, but expand into a broader market that we can see that extra growth both in retail, but broadly across all forms of sale with this new flavor format. And on top of that Woolworths range of review will come up in the Q4 FY '26. And off positive growth to date, we expect [indiscernible] an opportunity to really consolidate our position across Australian retail and put ourselves in a position to continually control that Kava conversation. I think Zane touched on it. This is the opportunity now that we're learning so much from the Australian setup, understanding what we can see in Amazon, the trends and also managing what's going on in the U.S. to have a chance to take a deeper look at the U.S. It's such a huge market that we need to make sure we do it with a very specific plan in mind to make sure we work well with the right retailers that we go into. So that's currently in the pipeline. I'll talk a little bit more later on to some of the questions that have come in regarding on how that's going to look. E-commerce, as I said, it's still the cornerstone of our business, and it will continue to be not only from a sales point, but also from a marketing and communication point. Obviously, the easiest, fastest access to consumers and a great opportunity to be able to share through the medium that it is still and video content about what we're doing, what Kava benefits are and our superior products. So I think the key to have a look at what has happened in this past quarter is the emergence of Taki Mai in the U.S. and on Amazon. The importance of this sort of comes into the ability to address a wider market, understand how we can utilize our strategic advantage with regional supply with different formats across the FijiKava brand as well as the Taki Mai brand and the great work that Andy has done in a little under 12 months since he's come on managing Amazon and building up Taki Mai from 7% up to consistently over 40% of our revenue while maintaining Fiji Kava and its position as well. So we're now in a position where we can really leverage some of those strategic plays that we've talked about with our pillars moving forward. I think on top of this, we realize the importance of this channel with that dual role of both sales and marketing. And as such, we've brought on an external consultant specialized in Amazon and the marketing advertising side to really make sure everything from our product through to our shops are performing and the value of our investment in there is getting the best return. That's also going to be supported by an internal investment, very much focused on quality content management and a continuous supply of that stream that is so important in the engagement side, both on Amazon, but also in all our other online platforms as well. Wholesale, Zane, I think you want to touch on a few things around the toll processing side before I dive into a bit...

Sure. So in the quarter, like I touched on earlier, we have appointed a second site for manufacturing our CO2 extracts right here in Australia. We worked with them in the quarter to ship our first volumes out successfully into the United States. This is in addition to a strategic processor we've been working with out of India, where we've come out of R&D stage in the quarter as well with confidence to achieve the yields and carbolactone levels for standardization for this channel. And we have had success -- repeat orders from beverage customers in the U.S.A. in this regard and looking forward to continued strength with the quarter and the years ahead.

Absolutely, absolutely. And I think off the back of this time and investment into these new products, toll processing partners and obviously, a big strong focus on Pillar 1, it's now given us position to create this new channel. And you can see with the results quarter-on-quarter, the opportunity grows. I think importantly, alongside that, we're working very hard with building up a mixture and a good balance of having strategic partners, resellers, including IMCD to be able to reach as effectively and as broadly as we can into each of the sub-channels that are out there. So that's also supported with direct relationships with brands or manufacturers where we can see we've got a value to add directly to them and with the relationship that we've already got established or we can control moving forward. So the important part here is the opportunity that's there. We're ensuring the volume that we're bringing in through Pillar 1, both from quality and access that we are ensuring that we've got partners that can bring that to market as quickly as we can to sustain this momentum that we can already see taking part in Q1 and Q2 of this financial year.

So cash on hand for the quarter was just over $1 million at bank. We did announce the closing of the second tranche of the convertible note as well in the quarter. Inventory was stable at circa $1.7 million for the quarter with a lot of the new product formats already in our 3PL in Houston and Texas. Subscriptions certainly are rising. Like Matt said, Andy has been doing a fantastic job. I think subscriptions are now circa 32% and growing on Amazon USA, which is extremely strong, a position to be in, representing $200,000 of inventory already presold in that regard. RTD formats continue to grow. The launch of our flavored kava formats in the U.S.A. now represent circa 5% of our revenue mix and is a key component of our growth plan into FY '26 and beyond. The team remained very disciplined with our spend. We have also cut further operational costs in the business as we continue our trajectory to -- and momentum towards breakeven. Thank you, Matt. So overall, December was a standout month for the Calmer Co, with the record monthly revenue of $910,000. Our wholesale channel, which we touched on, is delivering very strong performance to date. Year-to-date revenue has already surpassed our full FY '25 full results, which highlights the accelerating global demand for premium fully traceable kava ingredients. We are very encouraged by the momentum in the United States. Over 50% of our revenues now coming from the U.S.A. There are some very positive notes coming out of the U.S.A., which we announced the market with regards to regulatory change by the FDA, recognizing Kava as a food at the federal level. And like I said, just yesterday, the state of California have announced that they are recognizing Kava as GRAS which is a huge win for the industry. That tied up with the regulatory framework that we continue to put in place, not just Fiji, but across the Pacific. In Fiji, we are now moving to next stages now with the Fiji Kava Bill really gives the industry a strong foundation to scale from. And most importantly, as I keep speaking to throughout these webinars, it is us continuing to meet demand, but ensuring that the quality that we continue to export out of Fiji and the Pacific complies with international food safety standards, but also complementary medicine status in the Australian market, also dietary supplement status in the U.S. market as well. It's ensuring that we are exporting the best quality Noble Kava from the Pacific into export markets. So very, very good news indeed for the Calmer Co, and for the Kava industry.

So perhaps at this juncture, we'll move to some of the questions. Matt, if I can pull this up here. I think the first one was around regional supply. And I guess some of the kava prices have been increasing in the news lately. Are there any supply constraints in some parts of the Pacific? How are you protecting CCO momentum from these impacts? So the regional sourcing strategy is certainly key to that. With the Yaqona census that was conducted in 2024, we certainly have a lot of kava in the ground in Fiji. It's estimated that we have circa $1.3 billion asset value of kava ready for harvest in the ground. Over the last 12 months, we've both consumed and exported a total of $191 million worth of kava over the last 12 months. But most importantly, the regional sourcing strategy, which allows us to bring in kava from countries like Papua New Guinea, the Solomon Islands, Vanuatu, now [ SMO ] with [ SMO ] having the opportunity to export into Fiji, gives us the strength to consider and hedge against any volatility that may be in place as it relates to risk around adverse weather or pricing increases as well. Aside from that, I guess, the strategy, which we spoke to earlier and now coming to fruition with regards to the reemergence and healthy split revenue-wise between the Fiji Kava brand and the Taki Mai brand is very important part of this consideration. Taki Mai consistently now is at circa 40% of revenue on Amazon USA. U.S.A. is now certainly 51% of our total revenue for the quarter. And we see the Taki Mai brand as the regional brand for Kava and it continues to grow from strength to strength. On Amazon USA, when Andy joined us early last year, we were at circa 2% to 3% market share on Amazon. This, combined with Taki Mai and Fiji Kava now represents circa 8% to 9% of total sales on Amazon USA, which is a fantastic result for us. The second question was around e-commerce, Matt, and I'll pass this one over to you. E-commerce is a very important part of CCO's business as announced in the quarter. How do you continue momentum and growth across DTC and Amazon USA over the remaining year?

Yes. Look, I think I touched on a little bit of it in the slide. I think the key part of understanding the importance of e-commerce is also understanding the ability to communicate our quality, our supply, our unique ability to provide the best kava from the broad range of the Pacific. And therefore, we've made sure that not just as a sales channel that we're supporting it even more so from a marketing and advertising point of view. So I guess from the top of the funnel point of view in terms of content, the investment internally with a new content director who is going to look across all channels, but have a really high level of focus online to make sure that imagery, the communication, the conversation that we're having is constantly building that platform and building our communication and our tools for people like Andy and our new consultant from an Amazon point of view, [ Joel ] in terms of delivering on the advertising and marketing side. The other element that we've both spoken to is really understanding what are the key products that are -- that people are looking for, understanding the ongoing growth of traditional formats and a real good cornerstone anchor in there, but utilizing our incredible nimble ability with the vertical integration to bring the right products to shelf quickly. So flavored kava solutions, ready-to-drink or on-the-go solutions and making sure we're bringing them to market at the right price in the right time. Two sort of really key aspects to what we're doing. I think also we sort of touched on how we set them up for success and building that customer base that is very much tied to us, and we can -- using things like subscriptions on Amazon, but also the same strategy across both DTC and Amazon that we can create an ongoing and growing community very much tied into Fiji Kava and the Taki Mai brands and what we're doing as an overall business.

Next question again for you, Matt. This is retail. Retail is working well with Coles. What's the appetite for more Australian retailers? And why not do the same in the U.S.A.?

Why not indeed? Why not indeed? Look, I think both really valid points in both areas that we are very much sort of actively putting energy into. So Australia, first part is really firming up that leader in retail. We've done a great job with Coles, but looking to build on that now, as I said, with a broader flavored offering and bringing in new customers into that category, really rounding out with Woolworths to bring them up to a similar level of Coles and understanding of when we're talking about 67% of grocery sales, having those 2 locked down then gives us a position to strategically look into other channels and probably the one that's most interesting at the moment to explore is in that sort of, I guess, retail pharmacy space, along with understanding geographically, when I look at our friends across in New Zealand, where there's the opportunity there to sort of take control of that whole Australia and New Zealand space. The next part, I think, really comes into that opportunity that the U.S. presents. But as I said, I very much preface that with making sure that we're doing the right levels of investigation and making sure we go with the right partners. It is so big and so broad. It's very easy to spread yourself too thin. And we use a bit of a saying internally, as I said, inch-wide mile deep and something very much with retail U.S. is the way we want to approach it. So we can accelerate and scale quickly once we get the right success. Probably the key bits there to keep in mind, we've identified the opportunity here, and that's why we've invested into being present at Expo West, which is the world's largest natural products expo, a real opportunity to meet the retailers and the other sales formats that are going to be key as we go into the U.S., understand what their expectations are and making sure that we align with the ability to service them correctly, but pick the right partners to start with. That alongside of some initial work on some of the B2B marketplaces that are available in the U.S. to again, do the right level of investigation before we look to accelerate really quickly once we have the right plan to execute on.

Yes, indeed. Thank you, Matt. Last question was around wholesale. So this is something perhaps you and I both can have a go at. It's great to see wholesale in growth. How does CCO keep up with the opportunity and not get left behind versus others -- other major pharma ingredient businesses? I think the fact that we are based in the Pacific and we have strategic partners across the region and have secured supply agreements with the larger exporters out of the regional locations is key to this. The fact that we have full traceability and transparency is another important aspect that we need to consider here. We are not just buying cover in bulk that we are converting into an extract format, for instance, without vetting the quality assurance, standardization of the material and ensuring that we truly export the best quality extract formats going into the United States. This is very clear for me given the confidence that we have with beverage partners in the U.S.A. who have now, over the last 9 months or so, come back to order repeatedly for this type of format. It speaks to the quality of the ingredient. It speaks to the competitive advantage price-wise that we have, leveraging the fact that we are Pacific-based and we have a comprehensive supply chain to support the scale and our next steps with this channel in particular.

Absolutely. I think just adding to that, as Zane have talked about, particularly from the R&D and the development of the product and strategic partnerships. I think that carries through into what we're doing in the sales side, developing great relationships with direct partners, but also understanding the broader opportunity in what is an extensive market with many channels that we can attract to and having conversations and ongoing relationships with multiple resellers and distribution opportunities to allow us to utilize this great work that we've done with regional sourcing and quality development to be able to activate this and scale it as quick as possible.

Yes, indeed. I think that's it for questions. Matt, is there anything else perhaps we might want to consider with today's discussion, I think it's continuing the momentum. The key highlights for me really are further strength with the regional sourcing strategy, the momentum that we see with the regulatory framework in place now both in the United States as well as the preparedness with the Fiji Kava Bill in Fiji. We hope to see some momentum in this regard with the Australian Kava Commercial Import trial. Certainly, there is ongoing lobbying from the Calmer Company in that regard to ensure there is some finalization with the Kava commercial pilot trial and more flexibility in that regard as well to ensure that we have harmonization with standards currently in place across the ditch with our friends in New Zealand. And then, of course, continuing to look at opportunities beyond direct-to-consumer, including Amazon in the United States. Matt touched on this earlier with regards to retail opportunities, but we need to focus on this very strategically. The U.S.A. is a beast, and we need to consider very carefully how we might approach this, whether that be on a regional basis, dip our toes in the water first and see what that looks like, understand how we can potentially scale up to meet what we think is very strong ongoing demand in the United States. European Union market access as well continues to be at the forefront of work with our friends at The Pacific Island Forum Secretariat, EU market access I believe there's been a visit by the team into Europe last quarter as well to continue to knock on the door given the quality framework that we now have in place through Codex Alimentarius. And now, like I said, the Fiji Kava Bill coming to finalization finally, will add further confidence with markets like the EU and beyond to allow access once again for Kava into those regions. What else is there, Matt? Wholesale for me is very exciting. It is a very high-margin part of our business, and we're looking to add further strength there now given the confidence that we have internally with the results that we've been getting that we've optimized over the last 6 to 9 months now from an R&D perspective. Anything you'd like to contribute further there, Matt?

You've done a very good summarize of activities and obviously, some of the opportunities that aren't discussed at the moment in terms of Europe. So I think just to support each of those elements and add to the point that you made, I think that the way we go about these is really important and hence, the testing of the focus and then the strategic acceleration when we know we have full capability or full opportunity laid out in front of us.

Absolutely. Well, thank you, folks. I appreciate you joining us for the Q2 FY '26 webinar. Thank you, Matt. Wishing you all a very good Friday and a great weekend.

Likewise. Thank you, everyone.