Blackmores CEO exclusive, part one: 'We can't rely on e-commerce alone for China success'

By Gary Scattergood contact

- Last updated on GMT

Blackmores CEO Richard Henfrey.
Blackmores CEO Richard Henfrey.

Related tags: Retailing, Sales

Blackmores' long-term fortunes in China will be dependent on establishing a successful retail business alongside its current thriving cross-border e-commerce sales, its new CEO told us in an exclusive interview.

Speaking in Sydney, Richard Henfrey said the Australian supplement giant now had a registered business in the country and a 30-strong workforce.

Last week, the company announced​ that sales in China had grown 28% in the last quarter, compared to the corresponding period last year.

"China provides a huge opportunity for us we feel we are only scratching the surface of,"​ said Henfrey.

Earlier this year, he stepped up from his COO role to replace former CEO Christine Holgate, who has joined Australia Post.

"In the short term, we have e-commerce, but the long-term opportunity in China is a mix between e-commerce and retail. We want to build a sustainable, long-term business in China, and it will be a multi-channel approach."

Blackmores currently has a small range of products on the shelves in China, with many more currently going through the 'orange hat' registration process.

Henfrey added that while he welcomed the Chinese government's decision to extend the current e-commerce regulations​ for another year, he believed the ultimate aim was to see e-commerce and retail rules converge.

"They've signalled this very clearly, and the recent e-commerce announcement was evidence that they will do this in a very sensible way.

"We have more certainty now, albeit with an end date still, so we see this as part of the journey we are still on towards that multi-channel business."

Formula focus

One business that won't be continuing in China is the Bemore infant formula joint venture with Bega Cheese.

Henfrey said the market had "changed significantly"​ since the venture was first announced in 2015, with regulator CFDA enforcing a new registration system for brands.

However, he maintained that Bega would continue to supply Blackmores, and that the company remained committed to China's infant nutrition sector.

"We still see an enormous opportunity to be a retail brand in stores in China. We will be going through the registration system and we are getting closer with that. It's a complex process and but we now have a few manufacturers in Australia which already have the approval."

Elsewhere in Asia, Blackmores Indonesia business is now a year old and is responsible for $4m in sales.

The firm has employed 350 staff to drive the retail-based business model, with Henfrey optimistic about its long-term prospects.

"It will break even next year and I think it is going to be a great market for us. Indonesia is a country that's ripe for our industry; the population is younger, it's growing, and people have the disposable income to buy aspirational health products."

Huge interest

Blackmores launched its Pregnancy & Breastfeeding Gold product in the country last month, and the first imported pregnancy multi-vitamin on the market has been "flying off the shelves".

"The interest is huge,"​ said Henfrey. "It is the first time they have had access to such a product, and the desire to learn more about the benefits has been incredible."

The next target market is Vietnam, where a number of products are going through the registration process.

"We have our first employee there and a distributor, so we will be selling in the market soon,"​ he revealed.

In addition to sales growth in China, last week's quarterly figures showed that profits had increased by 28% to $15.4m, with sales having risen by 9% to $134m.

In part two of this interview — coming next week — we get Henfrey’s views on new health claim regulations in Australia, his reaction to being appointed to the top role, and why Blackmores' future success depends on "offering more than bottles of pills".

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