Scotia sells `wonderfood' to US
Tuesday 09 February 1999
The American company bought the worldwide rights to use Olibra - a substance that makes people feel full after a few spoonfuls - in its breakfast cereals, which include the best-selling Cheerios and Kix. General Mills will also be allowed to sell Olibra-enhanced yoghurt, soups and salad dressings in North and South America.
News of the deal with the US company, the world's largest producer of cereals, sent shares in Scotia soaring.
The stock - which has slumped in recent times as Scotia was hit by drugs setbacks and boardroom rows - closed 42 per cent higher at 98.5p. Analysts said the tie-up with General Mills, which has yearly sales of $7bn and a market value of $13bn, was a vote of confidence in the product.
"It's a good deal, the choice of General Mills is a good endorsement of Olibra and it is in the American market, which is by far the largest in the world," said Nick Woolf, the vice-president of BancBoston Robertson Stephens, the US financial house.
Olibra is a fat-based ingredient derived from palm and oat oil which appears to reduce appetite, helping people to lose weight. It is already used in the Swedish yoghurt Maval, sold in some UK supermarkets, and in some St Ivel desserts produced by the dairy group Unigate.
Scotia declined to spell out the financial terms of the deal, but it is understood that General Mills will pay the Stirling-based group a number of milestone payments during further product developments and a royalty of around 3 per cent on sales of Olibra products. The US group will also pay for the development and marketing of Olibra food. The first products are not expected to hit the market before 2001, as Olibra will have to be approved by the US regulatory authorities.
Dr Robert Dow, the chief executive of Scotia, said that the potential market for appetite suppressants was immense. He added that Olibra could be used in virtually every solid food, soup and milk-based drink. The worldwide market for cereals, soups and salad dressings was over $74bn last year, with almost $20bn spent in the US alone.
Dr Dow said the General Mills deal would help Scotia to move into profit over the next five years. He added that the deal should help the group to speed up manufacturing agreements with Asian and European partners.
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