Aus­tralian vi­ta­mins get ‘energy boost’

China Daily (Canada) - - BUSINESS - By BLOOMBERG

Boom­ing Chi­nese de­mand for for­eign-pro­duced vi­ta­mins and sup­ple­ments has helped an Aus­tralian com­pany triple its share price in the past year and prompted another to ex­plore a pos­si­ble sale.

Vi­ta­min and di­etary sup­ple­ment sales al­most dou­bled in the past five years inChina, jump­ing 12 per­cent to 100.1 bil­lion yuan ($15.7 bil­lion) in 2014, ac­cord­ing to mar­ket re­searcher Euromon­i­tor In­ter­na­tional.

Black­mores Ltd said sales to Chi­nese and other Asian buy­ers ac­counted for A$150 mil­lion ($105.8 mil­lion), or al­most one-third of an­nual rev­enue, in the year ended June 30.

“Ris­ing in­comes and in­creas­ing con­sump­tion of health prod­ucts in China are key struc­tural driv­ers be­hind this growth,” An­drea Chong, an eq­ui­ties an­a­lyst at Gold­man Sachs Group Inc in Mel­bourne, wrote in a re­port. She pre­dicted the stock may reach A$143 in the next year, helped by “the rise of cross­bor­der e-com­merce in China break­ing down tra­di­tional trade bar­ri­ers” and the pop­u­lar­ity of “brand Aus­tralia”.

“There has never been a bet­ter time to be an Aus­tralian health prod­ucts com­pany,” Chief Ex­ec­u­tive Of­fi­cer ChristineHol­gate said.

“TheChi­nese grewup in an en­vi­ron­ment where nat­u­ral medicine was al­ways part of their way of life, but they are also very savvy con­sumers and they want the best prod­uct, made to the high­est qual­ity stan­dards.”

Mel­bourne-based Swisse Well­ness Pty Ltd, which is con­trolled by the fam­ily of founderKevin Ring and man­age­ment, sees an “enor­mous” op­por­tu­nity in China, CEO Radek Sali said.

“There is grow­ing wealth and in­creas­ing aware­ness of health, and an ap­petite for high-qual­ity prod­ucts.”

While the com­pany does not sell di­rectly in­toChina, its prod­ucts are sold there via online sites such as Tmall and Taobao, two plat­forms of Alibaba GroupHold­ing Ltd.

“China’s online re­tail chan­nel is grow­ing faster than any other chan­nel and this is where we are,” Sali said.

Swisse over­took Black­mores and Sanofi-Aven­tisHealth­care last year to be­come the big­gest player in Aus­tralian mar­ket with about a 15 per­cent mar­ket share by value, ac­cord­ing to Euromon­i­tor.

China has the po­ten­tial to over­take Aus­tralia as the largest con­sumer mar­ket for Black­mores, Gold­man Sachs’s Chong said on Tues­day af­ter she changed her rec­om­men­da­tion on the com­pany to buy from neu­tral.

Black­mores last month re­ported an 83 per­cent jump in net profit for the year to June 30 as sales rose 36 per­cent to A$471.6 mil­lion.

About A$80 mil­lion of Black­mores’ sales were to China, with the bulk of those be­ing sold ei­ther to Chi­nese con­sumers in Aus­tralia or through the free trade zones, Hol­gate said. Prod­uct from ware­houses within the zones can then be sold through e-com­merce plat­forms of firms such as Alibaba with­out at­tract­ing the cur­rent 35 per­cent im­port duty, she said.

“The de­vel­op­ment of the free trade zones and the fall­ing Aus­tralian dol­lar has helped cat­a­pult the de­mand for Aus­tralian prod­ucts,” Hol­gate said.

For­eign com­pa­nies are per­ceived to of­fer su­pe­rior qual­ity — an im­por­tant ad­van­tage fol­low­ing Chi­nese prod­uct safety scan­dals such as the 2008 find­ing of toxic melamine in in­fant for­mula, said Chris Sch­midt, a se­nior con­sumer health an­a­lyst at Euromon­i­tor.

“Chi­nese con­sumers, es­pe­cially the more so­phis­ti­cated vi­ta­mins and di­etary sup­ple­ments con­sumers in the largest cities, still view lo­cally man­u­fac­tured prod­ucts with skep­ti­cism,” Sch­midt said. “Swisse seems to have taken on some­thing of an as­pi­ra­tional brand po­si­tion­ing in China. That’s very im­por­tant in the health and well­ness and sup­ple­ment spa­ces.”

ZHANG TAO / FOR CHINA DAILY

Sup­ple­ments and vi­ta­mins from Aus­tralia on dis­play at an e-com­merce com­pany in Zhengzhou, He­nan province. Sales of vi­ta­mins and di­etary sup­ple­ments in China were val­ued at 100.1 bil­lion yuan ($15.7 bil­lion) in 2014.

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