Else Nutrition has signed an investment agreement with a subsidiary of Hong Kong-listed infant-formula major Health and Happiness International Holdings (H&H Group) to accelerate the development of plant-based infant formula, which the start-up plans to launch in the US next quarter.

Headquartered in Vancouver, Canada, Else Nutrition was officially launched by its Israeli founders in 2018 and recently signed a manufacturing deal with an unnamed US-based organic baby-formula manufacturer ahead of launching its first products – dairy and soy-free infant formula and children’s nutritional drinks in the second quarter.

Else Nutrition said H&H Group has agreed to invest CAD5.75m (US$4.3m) in the business as part of a private placement of as much as CAD8m in shares. The investment is being made through H&H Group’s corporate venture arm, NewH2. It will equate to a 11.15% holding of Else Nutrition’s issued and outstanding common shares once the offering is completed, which is expected to be 26 February.

NewH2 invests in fledgling businesses, particularly in the areas of nutrition and care products. H&H Group, which set up the corporate-venture unit in 2018, produces infant formula, toddler milk drinks, and baby and children’s foods.  It says NewHwas set up to “support entrepreneurs who are using advances in technology and science to develop innovative advanced nutrition solutions”.

In addition, Else Nutrition said it has inked a memorandum of understanding with H&H Group for the “future distribution” of its dairy-free formula and children’s nutrition drinks for markets in Hong Kong, Greater China, “cross-border China”, Australia, France and Italy.

A spokesperson confirmed that cross-border China “is a well-known platform that enables foreign brands to commercialise via online platforms only, and be sold into mainland China via free commercial zones”.

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“The parties will work together in the coming months to formalise distribution agreements and develop business plans for the aforementioned markets,” Else Nutrition said in a statement.

Funds from the private placement will also help finance the distribution deal, along with accelerating product development.

Hamutal Yitzhak, one of the founders and chief executive, commented on the tie-up with H&H Group: “The strategic alignment with such a reputable, global and premium, health and wellness brand-builder, coupled with the investment, provide growth potential for our brand globally. It marks a significant milestone in our mission to change the way we feed our babies and families for generations to come, using real, clean, plant-based alternatives.” 

On completion of the private placement, Else Nutrition and NewH“will enter into an investor rights agreement pursuant to which NewH2 will be granted certain rights to maintain its percentage holdings of common shares in the company through participation in future financings, and the right to hold one board seat on the company’s board of directors”. 

Laetitia Garnier, the CEO of H&H, added: “Our NewHinnovation fund is working on some highly innovative ventures that align with emerging consumer trends. The plant-based trend is undeniably growing globally, but there are too few products that can fulfil consumers needs while bringing the right nutrition.

“Else’s revolutionary 100% plant-based non-soy infant formula is a unique proposition and partnering with Else is a unique opportunity for us to join forces with a very experienced and forward-thinking team, and to drive growth from an early stage with huge upside in a booming category.”