Life-Space co-founder back in the probiotics game with $40m bid to tackle booming Asian market

With the backing of private equity group H&S Investments, Silbery has acquired the assets of Probiotics Australia which had entered administration in February. 

The investors plan to spend up to $40 million on upgrading the company’s existing manufacturing facility as the partners look to tap into explosive demand for probiotics in local and Asian markets.

Silbery has a majority stake in the new entity, known as Specialty Probiotics Australia, with a 60 per cent interest, while H&S Investments holds the remaining 40 per cent. The purchase price of the acquisition has not been disclosed.

While the partners have taken ownership of the Gold Coast facility, Silbery anticipates a lead time of several months for licence transfers through the Therapeutic Goods Administration and the refitting of the facility with new equipment.

“We expect we’ll be hitting our straps from a production point of view from the first quarter of next year,” Silbery tells Business News Australia.

While he exited the probiotics sector in 2018, Silbery concedes he was a reluctant seller of Life-Space Group but bowed to the will of shareholders to take the $690 million offer on the table from supplements giant By-Health.

Silbery, who first ventured into the sector two decades ago, says he has always maintained an interest in probiotics. Since the sale of Melbourne-based Life-Space, he has launched probiotics products for dogs, among other pet ventures including pet-tech startup Ilume. 

“These have been going really well over the last few years,” he says.

Silbery reveals he nearly made a full-scale return to the probiotics sector five years ago with a new probiotic manufacturing facility in Brisbane where he explored a potential greenfield site acquisition in 2019.

“But it was such an expensive exercise and with a three to four-year horizon,” he says.

“When this (Gold Coast facility) came up, I have to admit it was an opportunistic acquisition which has really made the cost of building a manufacturing facility of excellence for probiotics reasonable and allows me to bring it to the market much quicker.

“The equipment to make these life cultures at a level to compete with the global giants is not cheap.”

Probiotics Australia launched in 2019 as the first Australian fermenter in the supplement space and was a white-label producer of probiotics and postbiotic products for the industry from its state-of-the-art facility.

Specialty Probiotics Australia plans to be an ingredients provider for the probiotics sector in Australia, with a keen eye on Asia – a market that is estimated to be worth about US$4.4 billion ($6.8 billion) annually at a retail level.

“That means the market for ingredients in Asia is about US$1 billion to US$1.5 billion,” says Silbery.

“The whole sector is going gangbusters. We know China is certainly looking for quality in this area because they are specialty ingredients that are very difficult to make, and Australia is seen is a country of manufacturing excellence.

“The (Gold Coast) site is being set up to support all those brands, not only to make ingredients but to manufacture their products on site close to source.”

Major shareholder H&S Investments is a critical partner in the push to access markets in Asia for Specialty Probiotics Australia.

“They have around 30 brands in their portfolio and many of them are China-facing,” says Silbery.

“They also have extensive go-to-market capabilities in China for those brands and they are growing very strongly.

“That really gives us the scale that we need to give us the confidence to make these heavy purchasers (for equipment). They are a great partner.”

Specialty Probiotics Australia also plans to create a “comprehensive library” of probiotic strains tailored to the Australian market.

“Australia's probiotic market is ripe for innovation, with consumers spending over $500 million annually on health supplements, having no idea about the quality of the raw ingredients, or where they are made,” says Silbery.

“Specialty Probiotics Australia will address these issues by sourcing innovative strains that are backed by science whilst also providing local production of ingredients and advanced manufacturing techniques to provide Australian and Asian brands with the most effective probiotic supplements.”

Silbery notes that his experience with Life-Space has given him a deeper understanding of the specific needs of the local market.

“After carefully studying the probiotic market in Australia, we recognised the need for superior quality probiotics manufactured with the best ingredients grown in Australia,” he says.

Specialty Probiotics Australia also plans to collaborate with global scientists to develop the next generation of probiotic ingredients, focusing on improved stability and effectiveness.

The aim is to create products that can be consumed in formats other than powders and capsules, allowing the business to compete as an ingredient supplier in the infant formula sector and in humid climates across Asia.