Neptune Provides Sprouts Organics Distribution Update

Neptune Wellness Solutions Inc., a diversified and fully integrated health and wellness company focused on plant-based, sustainable and purpose-driven lifestyle brands, is providing a distribution update for Sprout Organics, an organic plant-based baby food and toddler snack company, highlighting strong growth in the latest four weeks of Nielsen data and discussing its potential expansion into new product categories beyond the baby food aisle.

Certain information in this news release has been historically provided by Neptune in its quarterly and annual earnings calls. Due to the timing of Neptune’s most recent call, the availability of such information and certain other matters in which Neptune was engaged at the time of such call, such information was not available or could not be properly or fully shared at that time. As a result, this information is being provided now to investors in Neptune in a supplemental news release to ensure that investors have such information available to them related to the business and operations of Sprout.

Distribution Gains

• Distribution: Now available in 90 percent of the organic baby food market, up from only 50 percent a year-ago
• SKU Count: 92 SKUs available vs 74 SKUs a year-ago
• Store Count: Products are now in 27,000 doors vs 18,500 doors a year-ago, a 45 percent increase
• Added Distribution: In the last year, Sprout has established several distribution gains with leading retailers, including Target, Walmart, major supermarket chains and the largest national pharmacy chain in the United States (in 5,000 of their 9,900 doors) and is now shipping direct-to-consumers via the Sprout Organics website
• Geographic presence: Now available in all 50 states, as well as in Canada

Market Share & Growth

• Sales Growth: Sprout grew 40 percent, vs 15 percent for the more than all category, in the latest four weeks of Nielsen data for the period ending June 18, 2022, outperforming the product category in all time periods measured¹

• Market Share by Category²:
  • Toddler Meals: Sprout has a 19 percent share of the $14 million Toddler Meals category, with velocities (how quickly a product is sold) outperforming the category by 5 percent
  • Snacks: Sprout has a 5 percent share of the $199 million Snacks category, with velocities slightly underperforming the category (sales of newly launched Sprout Snack Bars are not yet reflected in the data)
  • Pouches: Sprout has a 5 percent share of the $410 million Pouch category, with velocities outperforming the category by 33 percent

Supply Chain Simplification

• Sprout has streamlined its supply chain to focus on fewer strategic partnerships, reducing the overall number of vendors it works with from 55 down to 22. This has allowed Sprout to improve supply chain efficiency and reduce costs, while maintaining fill rates.

Category Expansion

• According to Nielsen data, Sprout’s sales in the organic toddler meal category have grown at an accelerated rate since September 2020, outpacing growth for the Organic Baby Food category as a whole.
• The prepared foods category represents a $3.6 billion market size (according to Nielsen data), which is more than double the size of the baby food market and where data shows gross margins in the 30 percent range.
• New Up-Age meal products – Mealz™, a Sprout line of organic heat-and-serve bowls for children, which are a convenient option for busy parents who want to ensure their children get a full serving of vegetables – should be available as early as Fall 2022.
• Sprout is also exploring further category expansion, including Cereal, an estimated $21 billion market size; Vitamins, an estimated $7 billion market size; and Beverages, an estimated $124 billion market size (in each case, according to Nielsen data).

Statement from Sprout Management:
“We believe that our expansion efforts, in parallel with our cost-management strategy, will allow our products to disrupt the organic food market at a higher level. We intend to release new products into categories where we see potential for Sprout to capture sales demand in high-growth markets. By leveraging our expertise and unique partnerships, we seek to continue to strengthen our position and brand as a leader in the organic food sector and beyond.”