Probiotics perform well as Swisse owner Health and Happiness records continued revenue growth

25-Mar-2019 - Last updated on 25-Mar-2019 at 02:21 GMT

Sales growth in the group's infant nutrition and care segment was driven by a 21.3% rise in its infant formula business in China and a 33.6% rise in its probiotics business. ©Getty Images

Swisse owner Health and Happiness (H&H) Group has released its 2018 annual results, announcing a 9.5% year-on-year increase in adjusted net profit to US$197.5m (RMB1.32m).

The group also reported a 25.2% -year-on-year increase in total revenue to US$1.5bn (RMB10.13bn). This was attributed to strong overall performance, especially in its two core business segments — infant nutrition and care, and adult nutrition and care.

Core performance

Sales growth in the infant nutrition and care segment was driven by a 21.3% rise in its infant formula business in China and a 33.6% rise in its probiotics business, with a total revenue increase of 25.8% to US$880m (RMB5.9bn).

In particular, sales of H&H's Biostime and Healthy Times infant formula products saw a respective 19% and 172% increase. Market research firm Nielsen reported that the premium and super premium series under both brands held a 5.8% market share in China.

The group's probiotic revenue in its infant nutrition and care segment saw a year-on-year increase of 31.6% to US$156m (RMB1bn), thanks largely to new products being introduced in the Hong Kong and French markers, comprehensive branding and marketing campaigns, and continued consumer demand.

In the Swisse-run adult nutrition and care segment, sales growth was driven by a 13.7% increase in active sales in Australia and New Zealand and a 63.2% increase in China. An overall year-on-year increase of 30.3% saw segment’s total revenue hit US$611m (RMB41bn)

Growth in the China market alone accounted for 35.6% of Swisse's total sales, supported by revenue from cross-border e-commerce (CBEC) activity, which was driven by several innovative marketing campaigns.

In fact, during Tmall’s landmark Singles' Day sale on November 11 last year, Swisse was named the number one health brand and number one imported consumer brand across all industries.

Swisse also successfully registered its Ultiboost Calcium + Vitamin D product with China’s State Administration of Market Regulation (SAMR), making it the first Australian-made product in the vitamin, herbal and mineral supplement (VHMS) category to have been approved under China’s new 'blue hat' filing process.

Currently, the brand has a leading position on China's online VHMS market, with a share of 18.6%.

H&H also invested in the expansion of offline distribution channels in China to increase Swisse's brand exposure in the country.

Looking ahead to staying ahead

In a media release, H&H stated that it would "continue to implement its Premium, Proven and Aspirational (PPA) model and undertake innovative marketing campaigns and celebrity endorsements to positively convey the image of its brands on a local and global scale".

It expects to continue to face intense competition in China's infant formula market this year, but is confident it can "consolidate its leading position in the market by leveraging on its leadership in the premium and super premium segments as the premiumisation trend continues".

It will also continue to invest in branding and marketing campaigns, launch new product categories, widen its distribution network and "enhance its strategic partnerships with key customers in China" to ensure it can stay ahead of the competition in both the country’s online and offline infant formula markets.

In terms of its adult nutrition and care business, H&H believes increasing health-consciousness among younger consumers will drive growth.

In the release, it stated: "The group will further grow Swisse's brand exposure in the Chinese online and offline markets, as well as in other global markets, with the launch of new products, innovative marketing and branding campaigns, and through continued investment in sales channels.

"The group is also currently preparing filing documents for several Swisse products to facilitate the expansion of its normal trade business in China."

Outside of its infant and adult nutrition and care segments, H&H will also venture into new product categories, such as goat milk infant formula and organic baby food.

Its September 2018 completion of its acquisition of Good Goût, a French baby food brand, is expected to enable the group to take advantage of steady growth in France's organic baby food sector.

Furthermore, H&H recently acquired a Certification and Accreditation Administration (CNCA) approved factory in Australia that can support the production of goat milk infant formula.

Group chairman Luo Fei said in the release: "We look forward to further expanding the scope of our business with new brands and new product categories, while continuing to invest in our established and fast-growing baby nutrition and care and adult nutrition and care brands.

"This will move H&H Group further towards its goal of becoming a global leader in premium wellness, while delivering solid growth and returns to our shareholders."

NutraIngredients-Asia contacted H&H for more details, but a company spokesman said it "would not be providing further comment beyond yesterday’s results announcement at this stage".