Two billion dollar wearable technology companies created

Wearable technology for humans is a big business. There will be almost 40 product sub-categories in the next 10 years, including fitness trackers, smartwatches, connected clothing, smart eyewear, medical devices, smart patches, headphones, and hearing devices.

 

James Hayward, author of the IDTechEx report, Wearable Technology 2016-2026 advises, "Fuelled by a frenzy of hype, funding and global interest, wearable technology was catapulted to the top of the agenda for companies spanning the entire value chain and world. This investment manifested in hundreds of new products and extensive tailored R&D investigating relevant technology areas. However, the fickle nature of hype is beginning to show, and many companies are now progressing beyond discussing wearables to focus on the detailed and varied sub-sectors." Multibillion dollar businesses will be created but there is a hare and tortoise story in all this. The tortoise is wearable technology for animals and that sector has already created a two billion dollar business from a startup.

Allflex's origin goes back to 1955 in Palmerston North, New Zealand. Brian Murphy, a dynamic dairy farmer was looking for a reliable and easily readable product to identify his animals for life. With a manufacturer colleague, he invented and made a flexible plastic ear tag that will soon become the most efficient means of identifying livestock. The company they later created, Allflex occupied a new plant built in Palmerston North. Distributors grew its markets in Australia and the United States in 1974 and Europe in 1978. Slowly and surely Allflex became the worldwide leader of electronic animal identification by adding, in the 1980s, the Radio Frequency Identification RFID versions that are tolerant of obscuration and misorientation.

 

 

In 1997 The European Union mandated the double tagging of all new born calves in the wake of the BSE crisis. Traceability became a public concern (food safety for the protection of human health and management of animal sanitary issues). Allflex launches a range of new, highly secured and tamperproof tags to support strict European regulations. The scare in Europe grew the business as world leader and it also attracted an investment fund as purchaser.

 

In 1999 Australia was the first non-European country to start an official cow identification scheme. Australian authorities selected Allflex for the electronic tags. In the early 2000s, Allflex heavily invested on the automation of tag production lines and electronic supply chains opening new factories in Brazil, Scotland, Poland and Canada, and strengthening its commercial presence in Uruguay and Argentina. It continued investing in new developments related with animal identification (DNA & BVD sampling, specific products for sheep and pigs) and it opened a new factory in Turkey.

 

In 2013 Allflex was bought by another investment fund for a remarkable $1.3 billion. This was at the time when horsemeat found its way into the UK supply chain once again triggering improved traceability. Indeed electronic tagging of livestock is often a legal requirement unlike the wearable technology for humans. For example, such tagging is a legal requirement on cows in Australia. The recent theft of 500 cattle in New Zealand reveals how even cattle rustling is still a concern so traceability keeps being improved.

 

 

The investment fund that bought Allflex then backed it in making a string of livestock care related acquisitions, the largest being SCR, the global leader in cow monitoring technologies, for $250 million in 2014. In 2016 a large share was sold to another investment fund at an undeclared sum but doubtless a good exit. Allflex is now an even more commanding global leader in livestock tagging and care devices. Its sector is driven by health scares, new legislation, protection of rare species and the quest for efficient farming.

In 2013 Allflex was bought by another investment fund for a remarkable $1.3 billion. This was at the time when horsemeat found its way into the UK supply chain once again triggering improved traceability. Indeed electronic tagging of livestock is often a legal requirement unlike the wearable technology for humans. For example, such tagging is a legal requirement on cows in Australia. The recent theft of 500 cattle in New Zealand reveals how even cattle rustling is still a concern so traceability keeps being improved.

 

The investment fund that bought Allflex then backed it in making a string of livestock care related acquisitions, the largest being SCR, the global leader in cow monitoring technologies, for $250 million in 2014. In 2016 a large share was sold to another investment fund at an undeclared sum but doubtless a good exit. Allflex is now an even more commanding global leader in livestock tagging and care devices. Its sector is driven by health scares, new legislation, protection of rare species and the quest for efficient farming.

Now turn to the smaller and later developing market for pet wearable technology dominated by dog collars variously monitoring health, performance and other things. This business is driven by novelty, the desire for better animal healthcare and longevity and now the support of insurance companies. Tagg in smart dog collars and the like was bought by competitor Whistle in 2015 and Whistle was then bought in 2016 by the largest petfood and petcare business in the world Mars for around $114 million with the giant Nestle Purina also showing interest. Mars will doubtless resource it to become a clear number one but Mars will mainly gain value by leveraging its other petcare activities such as its chains of veterinarian centres and its petfood and non-electronic animal wearables businesses. For decades Mars has sold regular dog collars, leads and the like as part of its full service offering.

Both Allflex and Mars will also be able to ride the addition of more sophisticated medical diagnostics and drug delivery to the repertoire of their animal electronics. Some of which can already be seen on racehorses with smart diagnostic and treatment patches and monitoring bands. As the functionalities merge and become richer, it is inevitable that the Internet of Things becomes part of the story and energy harvesting of infrared, motion and light will be beneficial as power needs increase. See the IDTechEx report, Energy Harvesting Microwatts to Megawatts 2017-2027.

 

 

Even the legal requirement for tagging livestock is now seen for many pets as with the legal requirement to tag dogs in New Zealand and the injected chip being evidence of rabies injection of your dog or purchase of a dog license elsewhere. We expect the two markets of livestock wearables and pet wearables to merge industrially. Mars or an agricultural giant could well buy Allflex, in which case they are unlikely get any change from two billion dollars. The new IDTechEx report, Wearable Technology for Animals 2017-2027 gives that whole picture.

By contrast, in human wearables, Fitbit has risen in a much shorter time to about $2.5 billion in profitable sales but, despite 33% yearly growth, it suffers a share price depressed by fears of its products being commoditised or absorbed into smart watches.