Australian businessman Arie Nudel may have hit the entrepreneurial jackpot with his nutrition supplement GlucoControl, designed for people with Type II diabetes – the world's fastest-growing chronic health condition.
Nudel is a co-founder of Melbourne-based Omniblend Innovation, a joint venture focused on products that reduce the incidence of low or high blood sugar in diabetes (and pre-diabetes) patients.
The company has already set up distribution channels in multiple countries and plans to expand its existing market share in China.
Nudel's current role is an about-turn from his original career in finance. He jumped ship from an investment management role into biotechnology, thinking it would be nice to see “the other side of the fence.”
He began work for a company working with specialised dairy proteins that had a small manufacturing division, and when the company ran into financial difficulties, Nudel and three other partners (one of whom was supervising the manufacturing process), took over the company.
By 2008, the new company – Omniblend – was underway, specialising in dry and dairy powder contract manufacturing of protein powders aimed at the sports nutrition market.
The following year, Nudel made contact with Dr. Gottfried Lichti, a connection from his earlier biotech days, to discuss issues with contract manufacturing and to develop some ideas around functional foods.
The resulting joint venture, Omniblend Innovation, began in 2009, and the team began to develop a product that could address glycaemic control – an application for controlling blood sugar levels for all age groups.
At this time, Nudel's own mother had been diagnosed with type II diabetes, but he admits he didn't know much about the condition, nor of its vast scope.
“We were in the health food space and looking at what we could do. One of the big issues we had seen as a contract manufacturer was the ambiguous claims made by some parties on the efficacies and benefits of some health foods,” Nudel says. “However, numerous clinical trials and studies showed these foods actually did very little.”
The vitamin and supplement industry is a lucrative one, but its reputation has been tarnished by unethical practices such as the sale of products with substituted ingredients, or very cheap products at a significantly higher price, or the marketing of products with no proven benefits.
Some people also turn to health supplements rather than consulting a doctor - a real concern, adds Nudel.
Defying traditional approaches in this lightly-regulated industry, Nudel decided that he would step outside the norms and secure validation for his own products via a recognised third-party. He approached the Baker IDI Institute in Melbourne - an international specialist in diabetes epidemiology and treatment – and asked them to test his company's claim that the GlucoControl product provided an actual benefit for those who need to monitor their blood sugar levels.
He believes that if he had used the traditional “marketing first” approach, his company would have seen a better short-financial return - but in the long term, because the supplement industry has very low barriers to entry, copying of his product would quickly drive price down.
“I guess we came at this from a different angle,” he muses. “We had relationships in academia and with healthcare professionals thanks to our biotechnology origins. Our aim was to build a business with a sustainable competitive advantage and of course benefit human health.”
He says that, as an early entrant into this new nutritional market, the company has some disadvantages and must work harder than others to overcome uncertainty and educate consumers. There's also a certain amount of arrogance necessary: he believes they are doing something others have not.
Growth takes time and effort
His belief in the product was vindicated when the company launched its first patent in 2011 - and received funding of $1.35 million from the Australian government to validate the product and bring it to commercial reality. The next step - looking for additional capital investment – was a period Nudel now considers the worst of his life.
But by mid-2015, Omniblend had signed with Faulding, Australia's largest pharmacy distributor, licensing the technology under one of their brands to make it easier to raise capital.
Almost a year later came the first product launch and since then, Omniblend Innovation has signed licensing agreements in the UK and is seeing progress in the US, China and Singapore.
“Now that we are funded, things are progressing much faster,” said Nudel.
Looking back, Nudel believes that trying to multitask with a limited budget in the start-up phase was one of their biggest challenges. The team subcontracted much of the work, outsourcing skills as they were required so they could run smaller while still obtaining high quality people as needed while controlling expenditure.
Another challenge was securing their first distributor, but the team was committed to doing so, having early recognised that dealing with a small, geographically diverse market themselves would be more costly than bringing on an experienced distributor to handle direct sales and marketing, he explains.
“With R&D, everything is a technical challenge but one of the biggest ones in Australia is obtaining volunteers for clinical trials, including long-term lifestyle trials,” Nudel says. “Sometimes recruiting volunteers takes longer than the actual trial.”
“China is very challenging because of the high cost of market entry.”
Don't forget China
Despite more than a dozen business trips, Nudel feels inexperienced with China's vast market. “China's a big place with the variety of languages, dialects and customs apparent between provinces and even cities in some cases,” he said.
That put paid to the idea of sourcing a nationwide distributor – and added complications as exclusivity agreements are being negotiated.
But Nudel is keen to invest more heavily in China, and is working to secure professional local distribution partners - not least because the nation contains around a third of the global diabetes population. He says that success in China relies on time, and funding.
“China is very challenging because of the high cost of market entry,” he said.
Innovation, risk and luck
Does success come from failure? Nudel says that attitude towards failure in larger businesses actually prevents innovation. To him, smaller companies are prepared to optimise each sub-process in great detail before moving onto the next stage.
“For example, the existing formula for the GlucoControl product is the best of 300+ earlier formulations", he said.
“When you are developing something new, you cannot be swayed by people's comments, as they don't know what you do about the product or related processes.
Therefore, entrepreneurs need a filter mechanism," he adds.
Luck can also play a role in success: Nudel cites the fortuitous publication of a newspaper article which led to a connection with a distributor.
Pride and partnership
Nudel says he is most proud of leading his small team through a six-year process from product conception to launch, with the end result benefiting people's health. “Living with diabetes is hard and our product is improving people's quality of life," he says.
He's also quick to credit his business partner, Lichti – the science “brains” behind the company's success, adding that the pair's skills of research and business prowess complement each other nicely.
The next big hurdle for Omniblend Innovation will be to negotiate a distributor partnership in China that will overcome the problem of managing distributors in multiple regions and cities.
Whatever the future brings though, Nudel says – he's ready.