Morning, ladies and gentlemen. Thank you for standing by. Welcome to the ZOMA Labs Second Quarter 2021 Results Conference Call. At this time, all participants are in a listen only mode. Following today's discussion, we will conduct a question and answer session.
Instructions will be provided at that time for you to queue up for questions. A replay will also be available shortly after the conclusion of the call. I'll now turn the call over to Barbara Canno of Inspire Group. Please go ahead, Barbara.
Thank you, Robin. Good morning. Welcome to HENOMA's conference call to review Q2 2021 results. On today's call are Jorge Brake, Genoma Labs' Chief Executive Officer and Antonio Zamora, Chief Financial Officer. Our results were released yesterday afternoon and can be found within the Investor Relations section of our website, along with the appropriate filings with the Mexican Stock Exchange.
Certain comments made during today's discussion may be deemed forward looking All forward looking statements represent management's judgment as of the date of this conference call and are subject to risks and uncertainties that can cause actual results to differ materially from current expectations. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the Mexican Stock Exchange. In particular, uncertainty remains about the duration and impact of the COVID-nineteen This means results could change at any time due to the pandemic's impact on the company's business results. Management's outlook is a best estimate based on the information as of today's date. With that, I'm now pleased to turn the call over to Mr.
Jorge Brake. Jorge, please go ahead.
Thank you, Barbara. Good morning, Everyone and thank you for joining us today. Throughout the last year and a half, Genoma Labs has come together as a strong team This approach has surpassed well, enabling us to make meaningful progress on our 4 pillar strategy Thank the volatile operating environment. Our team pulled together, we executed with excellence And we delivered strong operating results. As you read in our press release yesterday, Denoma's 2nd quarter results reflected The challenging comparison to the prior year as we cycle the demand surge that accompanied the 2019 pandemic in Q2 2020, while navigating several current headwinds.
Vaccination rates in Latin America continue to lag With growing unemployment that impacts consumption across the board. Genoma is also experiencing FX Compounded by a challenging macroeconomic environment and inflationary impacts across the key markets where we operate. However, we delivered Ps. 3,900,000,000 in sales for the Q2 of 2021, A 6.3% year on year increase reflecting Genoma's resilient and dynamic business model based on our 4 pillar strategy. From a top line perspective, Q2 2021 represented the 11th consecutive quarter of increased sales And one of the best quarters in the history of the company.
Our sales benefited from the continued momentum of our product portfolio position As well as innovation strategies with line extensions and new product launches, also with the new categories such as novel meal, grooming, Etcetera. Net sales and EBITDA at Genoma's Mexico operations grew almost 9% 14% year on year, respectively, to close at MXN1.64 billion with a 20.2 percent EBITDA margin. Latin America Reached MXN1.9 billion during the 2nd quarter, a 15% almost 16% year on year increase. It's also important to note that today, growth in 20% of Genoma's growth comes from innovation initiatives. To put this into perspective, essentially none of our growth was driven by innovation before 2019.
At the end of the 16% in 2020, 20% in 2021 as already mentioned. We are now at a solid level as compared to our global peers on this front. NeoMatro is an excellent example of Acherita's Genoma product actually is growing behind innovation, reflected in a double digit year on year increase in sales for this product. This is achieved through improved formulas and fragrances, strengthened distribution channels and an expanded presence in the countries where we operate. The strong quarterly results were also driven by our decision to invest in supply and smargies, whilst preserving brand investments 2 of the advertising and consumer promotions, which has further enabled Genoma to gain share in a difficult operating environment.
While we faced significant inflationary pressure in the quarter, we anticipated and mitigated the We have also fine tuned our pricing strategy to be able to pass through costs while continue growing our volume. This quarter's results were favorably impacted by the intervention we have successfully made within our supply chains since the Q3 of 2020. Genoma's new and strong talent is focused on proactively and aggressively addressing all related opportunities, Expanding from demand forecasting to purchasing, specifically what, where and how much, while optimizing costs. As I have commented on our call last quarter, this is the year of the supply chain. In particular, We therefore are confident that we can continue addressing future headwinds reflected in the plans and pricing already in place.
We have always identified purchasing properties where we see important opportunity to further optimize costs, Particularly related to raw materials and packaging from which Genoma can benefit, implement The benefits we're seeing from streamlining our suppliers to become more efficient and productive and of our mature manufacturing plant. You will also have seen our continued strength in market underpinned by the fact that Genoma has been uniquely Competitively positioned to win. Genoma's broad range of products have powerful local brand recognition And can be found an attractive price point related to our competitors. From there, We continue developing a deep presence within the tradition of China, the same with mom and pop stores. While at the same time, we were able to shift this pivot Towards e commerce early in the pandemic, more than tripling Genoma's business within this platform over the last 18 months.
We drove the strong quarterly performance through our expanded presence with the traditional channels in Mexico, Central America and the Andean region during The first two quarters of 2020, while we also deepening e commerce channel sales, notably Mexico To attract these hot share campaigns that increase Genoma's share within this market in the quarter. Consumers are increasingly moving online, As we all know and we are ramping up our connected e commerce efforts to continue to take advantage of related opportunities. Hi, guys. Genoma was once again selected as a component within the SME V and V Total Mexico Electric Index For the 2nd consecutive year, as one of 29 companies recognized our outstanding E and P practices Based on its standard and core corporate system ability assessment. Additionally, during the Q2, we updated our diversity, inclusion and gender equality policy, also Further, we work with the consultancy to update our climate risk and opportunities analysis to closely align with the TCFD, the task force and climate related financial disclosure recommendations.
In closing, when I joined Genoma, Our initial focus was on diminishing the company to increase market share. We also strive to help Genoma's employees work differently and more effectively, We will continue doing so. Thank you for your attention. It is now my pleasure to turn the call over to Antonio, and I'll be back
Thank you, Jorge. Good morning and thank you all Thank you for joining today's conference call. As Jorge just shared, we once again delivered strong results With another quarter of sales growth, Genoma achieved MXN3.9 billion in consolidated net sales For the Q2 of the year, reaching a 6.3% year on year increase. Continued successful execution of our growth strategies, innovation and product launches during the quarter supported sales during this quarter. This increase is due to excellent new category performance in Mexico, Successful line extensions and product launches in key regions, go to market initiatives and digital advertising and marketing campaigns throughout the regions as Jorge had just commented.
Consolidated EBITDA increased MXN21,500,000 year on year to reach 777,000,000. However, as Jorge just Shared our 2nd quarter year on year EBITDA margin and sales results were adversely impacted By last year's demand surge related to the start of the COVID-nineteen pandemic in certain markets where we are present, As well as pronounced inflation, ForEx headwinds, decreased operational leverage and a negative sales mix effect Mexico net sales for the quarter reached MXN1.6 billion, An almost 9% year on year increase. This ARS 131,000,000 increase is Primarily due to a better than expected performance of new categories and line extensions as well as an improved go to market And in store visibility execution within the various trade channels where we operate. This increase was also driven by an increase in points of sales served as well as ongoing e commerce initiatives. Mexico's Q2 2021 EBITDA reached ARS 332,000,000 with a 20.2% margin, Reflecting a 100 basis point expansion, this was primarily due to the operational leverage effect on fixed expenses with continued cost controls and supply chain efficiencies reached during the quarter.
2nd quarter 2021 EBITDA was partially offset by expenses associated with the commissioning of new lines at the industrial cluster and investments made in trade channels. Net sales for Genoma's U. S. Operation decreased by 33% To COP 3.90 million also due to a challenging year on year comparison base with an extraordinary increase in Q2 2020 hand sanitizer sales and the residual effect of weak OTC portfolio performance Due to fewer 2021 cold and flu cases within this market, Traditional pharmacy chain consumer food traffic also decreased during the quarter due to increased e commerce competition. In Latin America, successful go to market strategies enhance install visibility, New product launches and line extensions as well as an increased store base drove top line growth during the quarter.
Net sales for the quarter increased by almost 16% year on year to MXN 1,900,000,000. Year on year sales in Argentina, Brazil, Bolivia, Chile and Colombia reflected a double digit increase when expressed both in local currency and in Mexican pesos. Consolidated gross profit grew 8% during the quarter to COP2.4 billion with a 90 basis point year on year gross margin increase. This was the result of increased operation And our leverage and the favorable impact of a positive sales mix on the company's consolidated top line Despite the considerable inflationary challenges with Genoma Sorry, which Genoma and companies throughout the quarter continue to confront particularly relative to the cost of goods sold. Net income reached COP 379,000,000 and COP18 million year on year increase Despite ForEx headwinds, Q2 2021 net income increased due to a lower reported effective tax rate As compared to the prior year, Genoma remains well positioned from a balance sheet perspective With a leverage ratio of 1.6 times net debt to EBITDA and MXN1.4 billion in cash and equivalents at the quarter's end, a 16.5% year on year increase.
During the quarter, we again issued short term bonds within the Mexican market at lower interest rates than those we have prepaid, Further improving our financial cost and maturities. This is further an affirmation of investors' We continue to invest in Genoma's buyback program to drive further liquidity on the stock. For the 3 months ended June 30, 2021, the company repurchased a total of 1 point 9,000,000 shares representing an investment of approximately MXN 38,400,000. In closing, I would like to reiterate Jorge's conviction in the long term performance of Genoma. We are delivering the results we knew we could deliver and are very optimistic about our strategy, Our team and the underlying strengths of our brands.
With that, let's Open it up to questions. Rob, please.
Thank you. We'll now be conducting a question and answer session. Our first question comes from the line of Antonio Hernandez with Barclays. Please proceed with your question.
Hi, good morning. Thanks for taking my questions. My questions you're having, the U. S, you mentioned Promotional activity there and you mentioned, I believe, market share gains, if I heard that correctly. Could you elaborate a little bit more on the overall competitive environment?
If you're expecting
what cost with input cost Pretty sure if you are expecting maybe a needed price increases from the overall industry from yourself And if you are going to continue as well with these promotional activities? Thanks.
Hi, Antonio. This is Jorge. I will comment on your question. In all terms, Q2, Q1 also have been tough quarters for many reasons. I cannot isolate one, But in addition to the external factors that Sanjay just mentioned, it had to do with FX, for instance, Some macroeconomic issues in some countries may be behind the impact of pandemic, Some social issues in some countries like Colombia that have had several weeks of social manifestations in the country, etcetera, etcetera.
In addition to those external factors, the internal, which is related to our business and categories and market and competition, That's also tough because all companies are trying to do their best as you can imagine, coming out of However, we have said, we truly are confident on the Our 4 pillar strategy continues to be valid, continues to be Very solid in terms of the things that we are doing in the marketplace. And I'll give you some examples. Together, we've explained that How competition is changing, the pricing situation and the promotional situation. I would say that if you think about our software I would say that, as I said, continues to be very valid. It was valid during 2020.
That was the best year in the history of In terms of sales and profit and continues to be valid in 2021, but I think it's going to become better than 2020 We are in the right path now. And my personal opinion is that the second half is going to be better than the first half. So what is working? We continue to be very aggressive in innovation and innovation means time extensions as you know, Competition for portfolio in different countries. Reestablishing and modernizing brands, you will see a huge re launch for 1 of our key brands in next month.
We continue also pursuing new big brands CapEx. And let me mention one other thing to see is that, as you know, we started with Genoma It's a new brand for us entering the lymphoma category in 2020. 2020 was not a normal year. Okay. The attrition were not opening, but we couldn't explain the brand to its full potential.
But the first half of this year is growing more than 30%. So that's the potential of the brand that will bring much more growth, profitable growth to the future in the company. We are also growing razor brand, Cumin, that was launched in Mexico 31 year ago. And now it's proving to be a very powerful initiative, reaching between 5% 10% market share depending on the on the accounts, as we've been mentioned, which is making us now be more aggressive in terms of the plan for the brand, The recruit promotions, communications, consumer, supply, distribution, etcetera, etcetera. And also talking about expanding those two brands To more countries in the country where we operate and you will see that happen by the end of this year.
So I think the power is denervation. As we said when we launched the denervation pillar 2.5 years ago, Now it's 20% growth is coming from innovation and that is one Driver that is going to make us be very consistent in terms of continued and consistent growth Also thinking and competition, to be honest with you, it's affected, it's been very aggressive, but more from a We haven't seen lots of initiatives in many other countries in terms of impact Again, our relative impact, I guess, on our business is more commercial, it's more short term. Sometimes we react, sometimes we don't react. We don't think we make sense. But that's not my not my part of this type of business.
Also in the go to market, we continue to We are stronger and stronger by the way in this area because we've been expanding our presence in the traditional channel. We continue Making stronger our presence and visibility in the modern Chinese too. And as I mentioned in my summary, We continue to grow dramatically in the e commerce platforms. And that has happened in most of the countries in which we also operate. So from a competitive standpoint, I would say no multiplication.
I would say that we're willing because we are consolidating the impact of our Innovation pillar that is being there 2.5 years, etcetera, etcetera, so it's very important. In terms of Pricing, as you mentioned, this is an area in which all of us are working very hard. They also mentioned inflation cost inflation is here and will stay All of us in all industries for a while and we've been able to manage, as I said, fine tune our pricing strategy. We are very close to all markets. We are very close to all costs and taking action in pricing As soon as possible.
That is happening this quarter very frequently. And when we do so is to cover the increased cost and our system and our model now is very agile, so that we can react Very quickening to any of the needs we may face in the pricing terms. If you put together the means of being aggressive in pricing because of cost inflation with the fact that we will continue innovating Commercially speaking, in terms of product initiatives, we have been able to compensate that. We are being able to review the risk of Pricing affecting our sales in overall terms. So it is working for us.
And we continue working, I think because we are taking a very well balanced approach.
Perfect. Thanks a lot for the color and have a nice day. Thanks.
Thank you.
Our next question comes from the line of Joaquin Lei with DITAO. Please proceed with your question.
Hi, good morning, quarter 2.
Thanks, Joaquin.
Yes. The first one, I would like to and you just Explain, I mean, the exposure that you have to oil delivery prices and so on and so forth, but yet I would like you to elaborate a bit more on the contraction In the margin that we saw in the Latin American operation and particularly you mentioned in your press release But there is some contraction that relates to sales mix deterioration, which is something that surprises me, right, because OTC growth over 20% and personal care guidance on 10%. So I would like to understand that better, please. And the second question goes to the U. S.
I understand the So, funky flu, but yet, I mean, the results of the U. S, they kind of look like a roller coaster in terms of sales and EBITDA. And If you could share with us where are we in terms of your new strategy in that operation in the 4 regions that you have focused, what we could expect for the coming quarters, That would be helpful.
Okay. Thank you, Joaquin. I will take I will make some overall comments and then Antonio will complement in some others. But To add perspective, in the U. S, I will start with the last comment.
In the U. S, yes, you're right, because you see the numbers, This is kind of roll the roller coaster in terms of results, especially if you compare it versus year And that is what we are seeing in Q2. However, and I was just with the U. S. Team Yesterday, but however, as you said, if you take out the anti bag gel, there was An opportunity that came together with COVID in Q2 of 2020 from the days The growth of the U.
S. Is double digit. That is the impact of big volume sold Given the opportunity, especially in Q2 when we were starting the pandemic. And as you can imagine, Also taking that anti bacterial volume from Q2 2020, the company's result In terms of sales, it would have been double digit. So that's the way I'm looking at it to confirm How solid our overall business is if we take out those things that were At that time, does that mean that we will not we are not continuing to sell gel antivirus?
Does that mean that, that explosion in consumption That came with the start of the pandemic. It's not there anymore. But people are still using gel, but not at the volumes that we're using in the 1st months of the pandemic. So we will continue into that business, But look at the levels we saw in Q2 of 2020. So in the U.
S. Business, as you said, The model that we launched last year, we continue very strongly developing it. This is year 2 of the restructuring we implemented in the U. S. And I would say that Given the way they are looking at it, because as you know, we are now thinking about expanding or looking actually, expanding our presence In other segments of the population, including the general market in a gradual basis, we will see The potential of our business will be much bigger than now as we start implementing those strategies.
And you will be hearing from us in the next quarter rather than in, but basically If we're looking for implementing initiatives of products within our portfolio, products that We appeal to more new segments of the consumers in the U. S. Market. One example of that quickly is Sverdox. We launched Sverdox in the U.
S. With a different mindset, Not the mindset of the Hispanic market, the mindset of the general market. So, it's a brand that appeals to all segments of Population, including the name, including the product, the uniqueness of the product. As you know, it's 8 items, Montschuler, no talloweth, great flavor. So as we started with that new initiative, Our mindset was this is for the general market, not for the Spanish market only.
And we are starting California By mid-twenty 20, as you may remember, and it's doing great. It's doing great to the point that today we are expanding our production capacity to be able to Made the demand before expanding it to other states in the U. S. That is and everything that was implemented In terms of consumer, in terms of go to market, in terms of supply chain, we can reapply to All the categories or brands, and the use in Kidi, France. So we are proving that we can gain into those other segments We have it's not the way we develop new initiatives as part of the U.
S. Portfolio. So that's I think That's the way to think about this business. I am very confident that in the next quarters, especially 2022 Different locations in different places and Tommy will explain more of that, but the margin differences I do specific things that happened in some countries and not in other countries, but I will let Tony to give more perspective on that.
Thank you, Jorge.
Thank you, Jorge. This is Antonio Joaquin. Thank you so much for your question. Regarding Latin America, I think your question is very interesting because usually it's a rule of thumb That OTC has a better profitability than personal care. It is a rule of thumb and it's the right rule of thumb.
But depending on the category and the specific moment that may not hold true. Let me give you one example, which is very relevant, at least for Genoma this quarter. Our paracetamol based business, the brand Taffyrol in Argentina, which is very, very strong and it grew At a very high speed during the quarter and we are very proud of that brand. The problem is paracetamol API It's important. We obviously were increasing prices of the end product in the market, But sometimes there are some lagging effects.
I mean, you take the hit of the COGS immediately, especially When it's about ForEx and it takes some time just to adjust pricing. So One of the things, one of the drivers of the margin decline in Latin America, which again, I Let me stress this is temporary, had to do with this COGS inflation, especially ForEx And particularly with paracetamol in Argentina. That's one of the drivers. That's one of the situations why The general rule of thumb didn't apply this quarter. On top of that, We always talk about the flu season and we generally speak about the Northern Hemisphere.
We talked about the U. S, we talked about Mexico During the winter, but now it's a winter in the Southern Hemisphere. So there are some Call and call medicines that didn't have the performance that we had anticipated. It's the same thing that we are experiencing everywhere else. People wearing masks, staying at home, washing their hands.
So the flu, at least for this year, Almost got eradicated from the face of the world. I think that the good news is that as people get vaccinated and as People start moving out and getting to public places, etcetera. There was This possibility that the flu will come again
and the
cold symptoms will come in the near future. We don't know if this is going to hold true as there's new guidelines at this moment. But the important thing, Joaquin is that one of the beauties of Genoma is that it's a Well diversified company in terms of markets, geographies as well as categories. So when we see an opportunity as we did last year With the hand sanitizer opportunity in the U. S, we took it.
We said at that time, this is a great opportunity to help us Offset the gap that was happening at that time in Chile, in Central America, in other markets That we're experiencing a very hard or strong lockdown. That was then, that was last year. This year, We don't have that benefit or that tailwind of the hand sanitizer. Many people already have the hand sanitizer, but then we are capturing new opportunities. As Jorge mentioned Swerdox in the U.
S. Is growing like hell. To be honest, it's one of the pleasant surprises. If we exclude the hand sanitizer business and we do apples to apples comparisons, The U. S.
Would have grown double digit. I mean, we need to extract that just for comparative reasons. And again, Xerox was one of the key drivers. As everybody knows, during the Q2, the Zoetrok line is already Fully commissioned and operational, we manufactured more than 5,000,000 bottles During the month of June, that's additional capacity that we didn't have. In the past, we have Many different third party contractors.
We added our lines and basically we sold everything. So Demand is not stopping for that product line. It's very promising. Growth in the U. S.
Works Well, unfortunately, we have these tough pumps because of the hand sanitizer. But excluding that, as I said, the U. S. Will have grown double digit. But let me ask you if I was Here, Norvord, you need more clarification in terms of what happened with margins during the quarter in Latin America.
As I said before, When you get especially ForEx impacts for APIs and some raw materials, this comes immediately And it takes some time for companies, for consumer goods companies to adjust pricing to the retailers and eventually To the end consumers, that's part of the strategy, that's part of the actions that we are taking to offset this negative Clint, in terms of COGS, this is something that all consumer goods companies are experiencing everywhere. But we are confident, I mean, this is just part of doing business and in the long run, we have seen this kind of Situations many times in our careers at not only at Genoma, but previously and we know how to deal with it. But obviously this quarter We have that effect. I don't know if I was able to clarify your question or you need more clarification, Joaquin.
No, you were. That was great color. Thank you, Antonio.
Thank you, Joaquin.
Our next question is from the line of Alvaro Garcia with BTG Pactual. Please proceed with your question.
Hi, Jorge Antonio. Thanks for the space for questions. I have two questions. The first one is on e commerce and conversion. I was wondering if you can now that it's been a couple of years Solid dynamics on that front.
I was wondering if you can comment, which of your products sell best online, which have the highest conversion, where do you see the best long term opportunity there? And my second question, a big chunk of your growth, obviously new channels, Given the strength of the traditional channel we've seen from you guys, but I was wondering if you can comment on sort of same brand sales. There's been a lot of line extensions Within specific brands and I just worry that maybe the core original brand might not be where it used to be. So any sort of comment there would be very helpful. Thank you.
Okay, Alvaro. Thank you For your question, I'll start with the e commerce front. So, theoretically, you're doing great in terms of growth In the e commerce diverse e commerce platforms in which we are participating basically in partnership With key companies, key customers, Amazon has become one of our largest partners in e commerce Involves in U. S. And Mexico, where they are operating in the case of our regions, But also Walmart and other similar to Walmart in different countries in Latin America are also now Key partners for us in our sales in e commerce.
And this has different fronts. We've learned a lot In the last couple of years, I know Jason, and I think the things we have been doing are working based on the results we are seeing. There are countries in which we already have 10% of our sales coming from e commerce. And that was our mid term goal for the whole company. So we're thinking now and taking that For higher level, given the success that we are facing, what is it that is working in our case?
I would say that 2 or 3 things. 1, we assigned people dedicated fully dedicated to this This program, we didn't have that before. So now we have a few experts in different countries that are Fully very take it to developing our business in e commerce. And as you know, it is different than selling in a physical store. So we are developing the same concept that we have for a perfect physical store.
Now we call it a perfect E commerce store, that includes the image of the brand, it includes the content we have, When we see the potential in terms of information, it includes reaction from answers to the comments from consumers, It includes the right pricing versus the physical channels or the physical stores And includes a strategic alignment of what we say in the e commerce platform versus what we say in the TV copy or the TV commercial or Different communication vehicles that we have. So there's consistency in terms of strategy we are using to grow in e commerce. So that's one big thing that is happening. Obviously, specific agreements with the Key e commerce platforms or companies
is also another key thing. We have
We've been able to develop new long term plans with them, so that we support each other in what we do I don't see that Suedo Chittal, Grubomen and Novamil that are key representatives in terms of Growth in the e commerce segment depending on the country, but you will see that those 4 or 5 brands are the ones that are Enjoying more growth in mobile applications. So it's behind that type of different strategy in The tranche that is working now, just to finalize my comment in the e commerce front is that This is the tip of the iceberg. We think that we are going to grow much more in the channel because what we are seeing today is the result of the first interventions. We are perfecting what we do in the e commerce as we call. So I think that we have Going to the growth of our core brands, that's a great question because it's difficult to say It's a core brand.
Let me talk about Genomex for instance. That's a short span of Genoma This year is growing more than 20%. And why is that? Why is that Well, it's going that much in a moment that is the market and everything is very challenging. And we say We always say that because of innovation.
If you think about the core brand when we started with the Ministry 2.5 years ago, The core brand was very strong, continues to be strong. And we call it core brand is basically the lineup we At that moment, I was working very well. What we have done in terms of innovation Same also with other interventions that have to do with formula, that have to do with packaging, that have to do with the way we communicate the benefits of the brand The fact that the brand is natural and we are having now that to a different level in terms of communication and that's one of the key benefits that the PANCIMO has happened. So it's a combination of restricting the core brand by doing all of these other things, including our distribution expansion in other channels, as I said, etcetera, but also at the same time bringing the other type of innovation, which is line tensions. We brought the new flavors, new fragrances that are in line with the consumer needs and trends that complement what we did The forefront of the business of the brand.
So if you add up those 2 things, you have a brand that is exploding, it's growing in Brazil, it's growing In the U. S, etcetera, etcetera, sorry, it's a combination of both, but I feel very comfortable with the fact that The core front is growing and the new line extension, the new product innovation It's complementing that. And the same thing is happening to Apepsia, same thing is happening to Sacaptivo oil, our with the low gold extension And now it's our coupon lineup. So those three different brands of Genoma experiencing the same sort of Of growth and the factors behind that. If you think about other brands of other companies, as you know, I come from other big multinationals.
And if you think about characruz like Pantene, Pantene is the same. It's a brand that has been in the market for, I don't know, 30 years probably. They keep growing the core, but they keep bringing new line extensions every year. So it's the combination of both That makes the brand much more stronger and makes the brand gain shares, we gain market share on a constant basis.
Alvaro, this is Antonio. Just wanted to complement Jorge's answer. When we talk about innovation, it's very important to clarify that innovation is a very It's a concept that is very wide. And let me use one example. When we say we are launching a new product, which is part of innovation like Swerox in the U.
S. For the U. S, Swerox is a new launch. It is innovation from scratch, But it is not for Genoma, because we have a successful brand, a successful category in Mexico. We're just following what we call at Genoma, the route to success.
So innovation it's innovation for certain markets For certain channels, that doesn't mean that it's a completely new product, but it's more about replicating Our existing brands, our existing SKUs in other markets. So that's innovation for those regions, for those markets. The good news is that it's proven innovation. Now we also have 2 types of other innovation. 1 is Line extensions, total new products that we are experimenting that we are entering.
I think that the hand sanitizer business last year Was an example of that. Blades and lasers was an example of that. Entering the infant nutrition was an example of that. But then we also have a third type of innovation, which may be called re innovation. And you see these in the Very large multinational CPG companies across the world.
You may see the same product, but it's not the same product. There's improved formulation, there's improved packaging, there's new communication as Jorge was Very well describing. For example, when we relaunched TUKOL, you may argue that the formulation was the same, But the packaging was different, the communication was different and the positioning of the product was different instead of targeting a niche segment Not only represented 7% of the market for the heavy smokers, we wanted to target the overall Market, the family market, which represented 93% of the market. So it's an innovation. We use the word innovation, But it's something proven.
And the good news about this is that it's less risky than starting something new, Number 1. And number 2, and I think this is very important to say, because if people compare What Genoma was doing, I don't know, 20 years ago when the company was launching new products every 6 months And then the old product is no longer existent because every time we launch something, it's been replaced. That is no longer the case. We launch innovation, new products, but we also have a substantive Based of our brands of our core SKUs that are very important to us, the tionacho, We launched a new version of TiO Nacho, but we keep the old version as well and we launch it in different Market segment, etcetera. So it's a great topic, innovation, it's always a great topic.
I think that I just wanted to clarify, I don't know if we were able to answer your question That it's not about doing everything new. We're launching new things definitely and it's very important. Boy, we are also renovating the core And we are reapplying the route to success that we have in certain markets to other markets. I don't know, Alvaro, if you would like To expand or
No, that was very clear. That was very clear. They're great examples. Swadox, for example, in the U. S.
Awesome.
The next question comes from the line of Nicholas Lorraine with JPMorgan. Please proceed with your questions.
Hello. Good morning, Jorge and Antonio. Thank you for the call and thanks for taking my question. I wanted to touch a bit on the production plant, especially on the personal care lines. Do you have some color that you can share in terms of ramp up of the existing lines and also The new lines you mentioned in the release.
And also what is your expectation towards the end of the year, thinking about how much of Your personal care sales could actually be sourced by the plant towards the end of the year. Thank you very much.
Yes. I'll just make one quick comment and then We complement. As part of the P9, it is going very well in terms of What we are doing in the personal care section of our industrial site, as you know, Timna mentioned and I also mentioned In June, we already produced 5,000,000 bottles of swaddlers. We are targeting to supply that number July or was on a monthly basis. It is going very well.
We are also starting in the next few weeks with production, initial loss of production Of our 2 shampoo brands, T and Ash and Banat and also Cream's in the following months. So you will see us By the end of the quarter, it's already those 4 categories being produced at the plant as we speak. And together with that And as part of our supply chain project, as I mentioned before, we are also following very close All the interventions that are being made to optimize costs. And I will let Tanya explain that because he's part of that project, he's very close to that Because in all cases, we are intervening in all key areas to make sure that we start seeing the benefit
Thank you, Nicolas for your question. It's a great question about and it's Part of the transformation that we are doing with the manufacturing cluster as Jorge mentioned, there's a number of lines To be commissioned and to be installed and to become fully operational and by the end of the year, I'm sure we're going to have Very good news. The 1st personal care line, which is the Swerox isotonic beverage, as we said, more than 5,000,000 bottles We're manufactured during the month of June. So that's excellent news. As of today, The shampoo line has just started tests with some initial batches.
Same thing has happened with the beverage line. We We need to do tweaking, fine tuning, optimization, etcetera. Then we believe by the end of Q3, that line is going to be Operational and manufacturing products. We are also in the commissioning phase of the facial creams, body creams And ointments and we are installing an additional line for medical devices in that plant. So In terms of the personal care plant, everything is going well according to plan.
Fortunately, we don't need Government permits or GMPs to manufacture there, so everything is more On our own hands, it's very hard to say what the percentage of products that are going to be manufactured in the Personal care plant at the end of this year. Remember, this is a multiyear project. And as Jorge mentioned, we are also upgrading some of our products. We are, for example, 1 of our Chapu lines will be relaunched as a more sustainable product With the environment, in terms of packaging, formulation, etcetera, So we are doing some changes to improve the quality, the marketing and the profile of our products. And so that is taking That is being considered in the plant, So that we gain even higher efficiencies in terms of COGS and better quality as planned.
I wouldn't adventure at this moment say You know how much of our personal care products will be manufactured there, because everything has been under Commissioning and we need to do a ramp up and the learning curves. If everything goes the same way as it did For the beverage line, I think that everybody is going to be pleased by the end of the year and that's what we are planning for. In the case of the OTC plant, well, everything is ready. It has been ready for a number of months. I think we're closing closer than ever to get the GMP for that plant.
We've seen the authorities moving faster than they did in the past. I think that the changes that the government did are positive and we expect to have Good news soon, but I wouldn't venture in terms of saying when that is going to happen. I just want to say We are more positive than ever in that regard. So once that happens, We will start manufacturing our products in the OTC plant as well. And the 3rd component of the industrial cluster It's obviously our central warehouse that is working seamlessly with high levels of efficiencies.
It's working really well. We're very proud of what they are doing. The other thing that is important to mention and It hasn't been asked during this call is what happened about the labor reform in Mexico. The good news And I want to highlight that is that Genoma was prepared. We did all the changes that were needed.
We don't need any Extension in time as other companies are requiring and there's basically no impact whatsoever, But we are prepared and that entailed a huge work with the people, with the culture. Everybody was satisfied the way we did it. Everybody is motivated. Everybody hopefully in the very short term, Everybody will have a chance to go and visit the plant. It's worth visiting and Jorge and I are Preparing something for the near future.
So I would say stay tuned. Your question is great, But I don't want to give us a number at this moment. I'm not we're not ready for that, Nicolas.
Yes. Just one quick comment to complement your answer, Antonio. We had 2 key visits In the last couple of weeks at the plant. But I just mentioned that because it's positive in terms of Contexta, COFFREPRIST, the Mexican authority that approves the GMPs and operational plans, This is the plant. And that was a visit we were expecting since early 2020 When COVID started, so it finally happened.
So as Tomio said, that's a very good sign of the new administration of Cofepris Starting to move finally. 2nd, last week, we had the visit of the World Bank Inspectors. And we explained that we delivered the grant. As you know, they financed the project and they were expecting the progress and they were very positive. The comments were very positive at the end of the visit, which confirm what we think is that we are now starting with this
Perfect. Thank you very much, Jose. Thank you.
Our next question comes from the line of Ben Wolfson with Lazard.
Yes. You've partly answered the question I had, but it was related to the GMP certificate For the OTC client, you used the word more confident than ever that it's coming soon. We've been hearing soon for a long, long time now. So I was wondering if you could expand on what you mean by more confident than ever?
I would say something I will repeat what I said Antonio has probably more perspective, but I said this visit of COVID-nineteen's authorities to the plant 10 days ago, it's something that makes us feel more confident because as I said, that visit was scheduled for early 2020. Didn't happen, then COVID showed up and never happened. And the fact that today it happened, Which meant that was the last piece of the last part of the process that we had to complete for them now to In theory, we delivered the final approval. So that was completed just a few days ago. And also the fact that as Antonio also mentioned that there is a new administration of Apery that basically already took over The management of the institution last month, they were announced 34 months ago, but it took over last month.
And all signs, all comments coming from the industry are very positive about these new people In charge of COVID-nineteen, and we are seeing it in terms of the visit, let's put it that way. Dono, anything else?
I completely agree with you, Jorge. And that's probably the news. The news is there's news. The original visit from the authorities was scheduled for April 2020, Okay. So that's when we were expecting the visit and the inspection for the GMP process.
That didn't happen because in March 2020, we had the lockdown in Mexico and there were very strict regulations in terms of You know what we call the semaphoros or the red the difficult red, orange, yellow, green lights in terms of You know the kinds of visits, inspections, etcetera, the authorities could do. So that inspection visit That was scheduled to happen in April 2020 got canceled because of that And it just happened and they were very strict. They were very professional. They look at every single aspect of the plant. And Generally speaking, it went really well.
Obviously, they made a lot of questions. It wasn't more than 800 different items that they checked And everything went well. So that's the reason why we are positive. And again, it was Just a matter of having that visit so that the process may continue. That was it is a requisite.
It's mandatory for them to do that in order to continue the process. And that's the news. Obviously, we don't have the GMP yet, but the visit has already been accomplished. And so we're waiting for the next stages. That's why we're more confident than ever, but still we don't have the GMP Yes, but it's closer.
I don't know, Ben, if we were able to answer your question.
No, no, you were, because the fact that you had the I did not know that. So that's a new piece of information that is very relevant. Thank you.
It is. It is.
Thank you. That concludes the question and answer portion of today's conference call. I would like to turn it over to Mr. Brake for closing remarks.
Thank you, operator, and thank you, everyone, for joining us today. I would like to conclude today While we expected that Q2 of 2021 to be a challenging quarter Despite the challenging year over year comparison and external headwinds, we have a strong foundation and a balanced portfolio, which drives consistency in our performance. We are well positioned to capitalize on those long term consumer trends, which accelerated during the pandemic, And we look forward to taking advantage of the momentum and adding wood to the fire for the future. Thank you very much. It's a great week.
Ladies and gentlemen, that concludes Sonoma Labs' 2nd quarter 2021 results conference call. We would like to thank you again for your participation. You may now disconnect.