Royal FrieslandCampina Engages EnWave Corporation to Advance R&D Initiative Using REV Technology

Another intriguing product development opportunity has been established by EnWave Corporation (CA: ENW – $1.46 & US: NWVCF – $1.09 & GER: E4U – €0.94) through a deal completed with a subsidiary unit of Royal FrieslandCampina N.V. (FrieslandCampina), the sixth largest dairy company worldwide.

Operating as a cooperative of more than 13,000 individual dairy farms based in Netherlands, Belgium, and Germany, FrieslandCampina represents the collective interests of its membership of independent dairy farms, assisting with development, production and sale of dairy products throughout a broad based European marketing area.

One avenue for FrieslandCampina to deliver further growth to its members is the investment towards innovation of new products that create value and build new marketing opportunities for dairy products or dairy-based ingredients.

As such, FrieslandCampina has established its Milkubator initiative, through which a small team of talented researchers is funded to rapidly create and develop new products. Similar to a start-up venture, this business model enables a small team of entrepreneurial individuals to more effectively advance and implement a new product idea. This process has already led to the development of a variety of new products using milk and milk components.

New REV Machine Sale Opens Potential for Additional Product Development

This week EnWave reported that it has signed Commercial License and Equipment Sales Agreements with Milkubator that will allow the innovation subsidiary to explore and evaluate the potential for using Radiant Energy Vacuum (REV) Technology to create new dairy products. The collaboration includes the sale of a smaller 10kW REV machine to be installed at the Milkubator facility for testing and product development. The Milkubator team will initially focus on the development of dairy-based products with the potential to expand the scope to other dairy products thereafter.

REV technology has already been proven to deliver a high-speed, low-temperature drying process that is effective for dairy products to preserve flavor, texture and nutritive value. Other licensed corporate partners in the sector are actively using the technology to successfully produce a variety of dried milk, cheese and yoghurt products. EnWave expects that the new relationship with Milkubator will eventually lead to the development of additional products that will hopefully encourage FrieslandCampina to engage in subsequent sales and royalty agreements and perhaps the purchase of additional REV machines.

Conclusion

The new arrangement announced this week is positive for EnWave on a number of levels. The immediate sale of a REV machine is a welcome addition of high-margin revenues. With several notable successes already in hand to create and establish new products based on milk, cheese and yoghurt, the dairy products sector has emerged as an important market for REV machines.

As with many other initial sales agreements completed by EnWave, this deal also has the potential for further growth as any successful product development would require the purchase of additional REV machines to maintain the license arrangement. Similar to the ongoing processes currently underway with the United States Army Natick Research Center and also at the College of Agricultural and Life Sciences at Cornell University, a favorable outcome to the R&D phase with Milkubator could then evolve into a more significant long-term license deal.

The roster of current agreements that EnWave has in place with a large number of high-profile established companies is impressive. This sale to Milkubator again demonstrates the successful business model employed by EnWave to commercialize REV technology and the longer-term exponential growth outlook for building royalty leverage. Smallcaps recommendation: BUY.

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