Annual report

BioGaia becomes even more consumer-oriented

The digitalisation trend, which was given an enormous boost in 2020 due to the Covid-19 pandemic, continued at the same pace in 2021. We took a number of important steps on our strategic journey to move closer to consumers and noted a highly positive trend, particularly in the USA, China, Vietnam and Indonesia, where we use an omnichannel strategy and e-commerce dominates the market. We are yet to fully recover in Europe, where digital developments are progressing slightly slower and sales are primarily through pharmacies.

During the year, we continued to build the organisation to complement our already strong position in business-to-business with a strong presence also in business-to-consumer. Our goal is to meet consumers on platforms that they use in all of our markets and to continue to invest in research and development in order to solve health problems for people all over the world. The right skills and change leadership are crucial in this transition. Several central new functions are now in place and work is continuing to integrate these into the existing organisation.

Unique strengths compared with our competitors

In the fierce competitive environment, with many large and active players in the market, BioGaia possesses unique strengths lacking in several of our competitors. We conduct our own research and development and use clinical studies to show that the products we make are really effective. Research is in our DNA and is something we will never sacrifice. Our research is indication-directed. This means we start with a condition such as colic, constipation and osteopenia and conduct pre-clinical and clinical studies that focus on this particular condition. Few other companies use this approach.

During the year, BioGaia Pharma received formal approval from competent authorities to proceed with both of its planned clinical studies. It is fantastic that we could successfully start two clinical trials of a potential pharmaceutical despite limited resources and are now progressing to the next phase in drug development.

We are also constantly striving to remain at the fore-front in respect of new product formulas. BioGaia was first in the world to launch drops and chewable tablets. We want our products to be convenient for consumers and to work in everyday situations and to always be based on the insights we gain from our consumer surveys.

Strong platform for profitable growth

BioGaia’s brand is already global and we have a better spread than all of our competitors, largely thanks to our outstanding distributors who work hard to get doctors, dentists, midwives and nurses to understand and recommend our products to consumers. Our broad spread is an excellent tool in the fierce competition for consumer attention. Our global presence is also a very strong platform that we can leverage on our journey to become even more consumer-oriented. Combined with our clinically tested products that have been proven to be effective, this will provide the conditions needed for long-term growth and profitability in the major shift currently taking place in the market due to digitalisation.

Greater presence in key markets

Overall, 2021 was a good year when many important pieces fell into place in our efforts to continue to build BioGaia’s brand. I am pleased by the professionalism shown by the organisation in delivering on its commitments. Despite continued sluggish sales in Europe, this was offset by the strong performance in other parts of the world. In Asia, sales increased in part due to our online ventures in China, our sales via dental surgeries and our own e-commerce platform in Japan as well as advantageous demographic trends in Indonesia and Vietnam.

The USA accounted for the most outstanding development, where several successful launches of new products together with our omnichannel strategy yielded another record year. The USA is now BioGaia’s largest market and it was a great pleasure to sign an agreement at the end of the year to acquire our American distribution partner Everidis. BioGaia and Everidis have been partners since 2007, where Everidis has leveraged its unique understanding of the USA probiotics market and been highly successful in its omnichannel strategy combined with marketing to the healthcare sector and end consumers. This approach has set a standard for the whole BioGaia group. I am now extremely pleased that we have made this partnership permanent, can contribute resources, strengthen the pace of efforts to reach out directly to consumers, and build BioGaia into a leading brand in the USA.

We are currently present in 110 countries, through distribution partners and our own subsidiaries. We established BioGaia Japan in 2006, with a unique concept targetting dental clinics. At the beginning of the year, Protectis Mum was launched for pregnant women with very good results while we concurrently increased our presence in digital channels.

In Sweden, we took over from the previous distributor of the Adult Health portfolio. BioGaia is now available at the main pharmacy chains and on e-commerce websites, online pharmacies, from Amazon and in our own online store and we have continued to grow in all channels compared with last year.

We have also taken over distribution in Finland, where BioGaia’s products are now available at Finnish pharmacies and e-pharmacies under our own brand. In November, we started our own sales company in the UK. Our products will now be sold via our own online store, from Amazon and at selected pharmacy chains both online and offline.

New products and uniform brand offering

As a means of achieving our target to meet consumers regardless of where they buy their probiotics, we must invest even more in marketing directly to consumers and we intensified our efforts to add more consumer-oriented communication during the year. We have strengthened the management team with a new function, BioGaia Digital, which is similar to a digital incubator. BioGaia Digital works closely together with marketing and sales to support the organisation and our partners with guidelines, tools and content to ensure a uniform brand offering.

At the same time as we are investing in both physical and digital sales channels, we are also striving to develop new products together with our amazing distribution partners. Consumers are increasingly aware and want to know what the products contain, and quality and safety are crucial elements. In this respect, BioGaia has a unique strength and competitive advantage since research and clinical studies form the foundation of our offering. Our origins are in developing clinically tested probiotics of highest quality for children and we are now evolving to focus on great products for consumers throughout their life cycles. We want to improve global health, which is also one the UN Sustainable Development Goals. It is very gratifying that our research company has made tremendous progress during the year. BioGaia Pharma has received approval for two clinical studies and MetaboGen is focusing on developing next-generation probiotics.

Stepping up sustainability work

We have continued to work hard with sustainability and have taken several steps towards the goal of integrating it in all parts of the business. One highly positive effect of our strategy to increase our direct presence in markets has been that we now have greater influence over our environmental impact. We have stepped up efforts to reduce emissions from our packaging and to phase out palm oil, introduced a whistleblower system, held Group-wide anti-corruption training programmes, implemented a Code of Conduct and increased diversity in both management and on the Board. In addition, we continued to pursue our strong and important community engagement by supporting various organisations in health-promoting activities and through the Prevent Antibiotic Resistance (PAR) foundation. As a result of our hard work, in November we welcomed the fact that MSCI raised BioGaia’s ESG rating from BBB to A, an important endorse­ment for us and our shareholders.

There is clear and strong growth in the health trend and in preventive healthcare. People are increasingly interested in proactively improving their health, and probiotics can help to provide a balanced intestinal flora and an effective immune system. Given BioGaia’s passion, inherent potential, strategy and cooperation, I am very optimistic about the future. I would like to take this opportunity to thank all of the exceptional and dedicated employees at BioGaia, our customers and other partners for a marvellous job this year. Together, we have the necessary prerequisites to achieve our vision to become the most trusted probiotics brand.

Increased illness and growing health interest

Insights gained from a market survey completed in May 2021 indicate that consumers have become increasingly concerned about their basic health, such as vulnerability to diseases and ability to recover from sickness. The prioritisation of, and interest in, health with a focus on the immune system has increased around the world. 64 % of the global consumers in the survey stated that they have take action to improve their health and immune system over the past year (2020). 70 % of the polled have taken active measures to strengthen their health and immune system, compared with 53 % who answered the same question one year earlier.

The trend whereby a growing number of consumers want to reduce the risk of falling sick and retain good health confirms a change in consumer behaviour and that BioGaia is on the right path by adding consumer communication in channels complementary to the healthcare system. Previously, BioGaia mainly came into contact with consumers first when they sought medical care and needed treatment. As a large consumer group is thinking more about preventing disease and maintaining good health, it is important and relevant for BioGaia to catch the attention of consumers at an earlier stage, on Google, via PR articles, advertising on health website or via relevant influencers.

In the same survey and when answering questions about the health areas they hope to improve in the coming year, gut health and the immune system were the most popular areas and are areas in which BioGaia offers health-promoting products.

Changes to consumer purchasing behaviour

Digitalisation and the transition to online purchasing, which has been a clear trend for many years, have accelerated as a result of the pandemic. The lockdown of society and restrictions on physical contact have even convinced parts of the population that were previously reluctant to use technology to choose digital alternatives.

With the continued restrictions in society in 2021, the change in consumer purchasing behaviour, which was identified during the first year of the pandemic, has continued). E-commerce has grown and a broader target group is now opting to search for information and shop online. Food and health products are goods that have noted a clear upturn in e-commerce). In line with its omnichannel strategy, BioGaia has intensified work to add communication directly to consumers in digital channels and make its products available via e-commerce.

Lifestyle and preventive healthcare

The world’s population is growing and ageing, and as a result there is increasing interest in health. The western lifestyle has spread across the world in recent decades, as have the resulting lifestyle diseases. The physical and mental health of a growing number of people are being impacted by stress, sedentarism and poor diet. Concurrently, a rising number of consumers are taking greater responsibility for their health by seeking information about healthy diets and preventive healthcare. The interest in health products and food supplements is therefore expected to continue to rise sharply. Interest has grown in recent years in the importance of intestinal flora for our health and it is increasingly clear that the intestinal flora changes as we age.

Trends in the wider world provide both challenges and opportunities for BioGaia and our ability to create value for stakeholders through our research and our products.

Unrelenting growth in antibiotic resistance

The focus on the pandemic has overshadowed another pending global disaster, galloping antibiotic resistance. According to field reports and surveys from the WHO, there is a risk for further spread of antibiotic resistance following an increase in the incorrect over-use of antibiotics due to the pandemic.

With their immuno-strengthening effects, probiotics may have an important role to play in the fight against antibiotic resistance. A study published in the European Journal of Public Health shows, for example, a link between intake of BioGaia’s probiotic L. reuteri DSM 17 938and a reduced need for antibiotics in children.

The Prevent Antibiotic Resistance (PAR) foundation, which BioGaia started in 2017, makes a financial contribution to research and information on measures to reduce the need for antibiotics. In 2021, funds were distributed to projects focusing on preventive measures among elderly individuals.

Increased focus on sustainability

Few people can have missed the COP26 climate summit and the major humanitarian crisis cause by the pandemic worldwide. Consumers, and also other stakeholders, have become increasingly aware and sustainability is more frequently an important demand imposed in connection with purchasing or collaboration. Issues related to responsibility, environmental impact, business ethics and control are more important from a business and risk perspective. Customers want sustainable products and services while suppliers want to work with innovative, long-term and stable customers. Acting responsibly is also more highly valued by the employees of today and tomorrow.

In 2021, BioGaia took additional steps in the right direction to ensure good business ethics, improve its environmental impact and offer a workplace that motivates and creates well-being. Read more on page 36.

The main aim with BioGaia Academy is to raise awareness and knowledge of probiotics and their positive effects in a range of different areas where BioGaia has a strong scientific base. We also highlight studies and analyses by other groups to broaden the picture and knowledge about probiotics. The content and material used in the training is prepared together with our medical experts. The purpose is also to promote networking and communication among the participants and hence create more ambassadors for probiotics.

Our ambition is to have a limited number of participants per course to optimise learning for each participant. The candidates chosen to take part in our training are selected with the help our partners, and through BioGaia’s own internal contact network.

Value created by BioGaia Academy

Creating networks of researchers and people who are interested in a specific area contributes to valuable skills. Participants are from a variety of backgrounds and from every country in the world, and this enables us to gain new insights from the various experiences of participants, how products as used and what needs exist. Following the initial pilot course in paediatrics, which started in April 2018, additional training courses have been held. This included training in child health, training for dentists in oral health and a pilot course specifically for Chinese doctors, also in child health.

29 dentists from 14 countries took part in oral health training between May and November 2021. The training programmes were considered highly successful and, for example, a few of the participants came up with new ideas for clinical studies using probiotics. After the end of the programme, BioGaia held an additional webinar for the group and is planning more in 2022, as well as a face-to-face seminar (if the pandemic situation allows this).

The Expert Program Pediatrics China training programme was prepared together with BioGaia’s Chinese partner Chongqing Little Sunflower Health Industry Development Co. Ltd, in response to the need for pro­biotics training for Chinese doctors. The pilot course with six doctors began at the end of August 2021 and ended in mid-December 2021. BioGaia’s Chinese partner wants to start more programmes.

BioGaia’s goal has been to have a maximum of 20–30 doctors on each course. Some 35 doctors have graduated from the two courses within paediatrics we have held so far. From the round of training that began in 2018, both BioGaia and involved partners have continued to cooperate with more than 50% of participants who graduated. The participants’ knowledge level improved considerably during the first training programme that BioGaia Academy carried out, which indicates that there is still plenty to do.

First-class training in probiotics

BioGaia wants to offer first-class training in probiotics that is relevant and easily accessible for the target group. The ambition is to continue to develop BioGaia Academy’s training platform, both for external and internal target groups, by focusing more on the user’s perspective, creating variety with interactive modules and through short video lectures.

In addition to a partner programme in oral health, BioGaia is planning an expert programme for adult health (2023) and general training that focuses on child health.