Marcus Blackmore exclusive: Blackmores boss says firm got 'a bit too fat, too slow and too bureaucratic'

25-Mar-2019 - Last updated on 03-Apr-2019 at 07:52 GMT

Blackmore took on the position of interim CEO on condition that the firm would start a programme of 'streamlining the business'.

Blackmores boss Marcus Blackmore — who has been named interim CEO in the wake of Richard Henfrey's departure — has emphasised the need to 'streamline' the Australian supplement giant's business and boost its China presence, claiming the firm had become too bureaucratic following a period of sustained success.

Speaking to NutraIngredients-Asia shortly after he was announced as the firm's interim CEO, Blackmore said he was adamant that Blackmores needed to be "more aggressive" in addressing certain urgent issues.

These issues, he said, had played a part in the company's 23% drop in share price, amid the release of its latest half-year results.

Streamlining for speed

With regards to his role as interim CEO, Blackmore said, "I think the measure of how well I do the job will be how quickly I can get rid of it, because we all want somebody who has the work ethic and passion I had in my 30s and 40s when building the business.

"I'm 73 — I don’t need another job in my life, but I'm looking forward to this one."

According to Blackmore, one of the conditions on which he took on this position was that the firm would start a programme of 'streamlining the business'.

And in typical forthright fashion, the son of the firm's founder Maurice Blackmore — and a board member since 1973 — immediately questioned the stance of some of his fellow colleagues.

"I know the board has talked about 'transformational change', but I don't see it that way at all — I see it as a matter of streamlining the business. We just have to be more aggressive in addressing the issues that have been going on for a couple of years now.

"One of the challenges for a company like ours, which has had substantial growth over the last few years, is keeping up with that growth internally. We have to be quicker — it's fair to say we've gotten a bit too fat and bureaucratic, and we're just too slow in making decisions."

He also acknowledged the need to be more innovative than before, especially in the face of a dynamic and fast-changing supplement market.

Speculation over resignation

Blackmore made it a point to once again emphasise that Henfrey's resignation had "nothing to do" with the drop in the company's share price in the preceding week, saying they were "two totally separate events".

"Richard's done some very good things for the company. But then he sat down with the board, which gave him some perspective on where it wanted to take the business, and I think he felt it was time for him to move on."

While Henfrey was originally supposed to stay on as CEO until the firm had confirmed a replacement, he later came to an agreement with the board that his last day as CEO would be March 29, after which Blackmore would take over on April 1.

The board is conducting a global search for a new CEO, and Blackmore hopes it will have found one by the end of the financial year.

"It could take three to six months, though I'd like to think we'll have somebody new by July 1 to take full responsibility for the business for the next financial year."

High risk, high returns?

Blackmore then attributed the slide in the firm's share price to the Australian share market being "very China-sensitive", saying, "We had put out a half-yearly announcement to the stock exchange and indicated that our profit wouldn't be much different from the previous year's.

"Unfortunately, the Australian share market is very China-sensitive. Opportunities in China are significant, but they come with levels of risk that probably don't exist in other Asian countries we're in."

Analysts, on the other hand, have attributed the company's share price decline to increased competition, as well as overly rapid expansion of its China distribution. Blackmore, however, disputes the latter, though he accepts that there was a lack of understanding of how Blackmores products were being sold in China.

"One of the problems with daigou is you have very little control over it, and it's very hard to estimate how much product daigou sellers buy in Australia.

"It's very difficult for us to track how much volume goes through that channel, so I suppose in that sense, there's a lack of clarity around channel activity, but I don't think there's a lot we can do about that.

"Where we came unstuck in the last six months or more was with regards to Chinese university students in Australia. They were buying our products through discount pharmacies and selling them in China through various platforms."

However, when the Chinese government began to inspect all the packages going into the country, these students refrained from shipping their stock to China, for fear it would be confiscated at the airport.

According to Blackmore, this gave rise to uncertainty in the daigou market, which in turn affected the firm's China performance.

Challenges in China

Going forward, Blackmore said the firm was keen to grow its China business, and that he was confident it would do so.

The firm has the advantage of being well connected to the government, having taken a position late last year in the China International Import Expo Alliance. At the same time, it is considering tying up with a Chinese company that can ramp up its logistics and distribution capabilities, which it currently lacks in China.

Blackmore said: "It might also involve joint ventures with companies, particularly in the regulatory area, to improve our China business as opposed to just relying on daigou or the free trade zone."

"At the moment, we can ship Australian products through those platforms, but if we want to sell them in pharmacies in China, we need blue hat registration. Sometimes, that can take up to 18 months to two years, so it's more difficult to get established in China. But we're keen to do so."