Domestic over daigou: Australian Nutrition & Sports prioritises local expansion as IPO looms

By Cheryl Tay contact

- Last updated on GMT

Currently, ANS' sports nutrition and wellness products are stocked in health stores and fitness centres in China. They are also sold via WeChat, Tmall, and JD.com.
Currently, ANS' sports nutrition and wellness products are stocked in health stores and fitness centres in China. They are also sold via WeChat, Tmall, and JD.com.

Related tags: daigou, Australia, IPO

In light of an imminent $8m IPO, manufacturer Australian Nutrition & Sports (ANS) says it will focus on building its brand in its home nation and the China market before going down the daigou route.

Currently, ANS' sports nutrition and wellness products (which include protein powders and bars, as well as snack bars and adult formula milk) are stocked in health stores and fitness centres in China. They are also sold via WeChat, Tmall, and JD.com.

Its infant formula products are available on JD.com and several smaller e-commerce platforms in the country.

Unlike many other Australian companies, ANS has opted to hold off on selling to China via the daigou​ platform. While there are a steady stream of daigou​ sellers who purchase ANS' products from the its Hong Kong retailers, the firm believes that further establishing its brand both at home and abroad will attract daigou​ sellers in good time.

CEO Tom Lashan told NutraIngredients-Asia​: "The daigou channel works well when you have a recognised brand, and we believe the marketing launch of all the ANS products will attract the interest of buyers from China.

"We feel, after the initial discussions we've had about the potential opportunities in the daigou channels, it all comes down to branding. Customers in China needs to know the brand so they know what to order, so the daigou channels know what to source for.

"Making our products available through that channel while the brand still needs to grow, I feel, would be a waste of expenses. We are better off spending those funds on marketing to grow the brand, and once it is established, the daigou channels will approach us to do business with them.

"My personal experience is that a lot of companies try to use that channel too soon and waste a lot of money without getting a substantial return."

Domestic do-over

Now, the firm wants to increase its domestic retail presence, and is working on a marketing campaign that promotes its products as 'the ANSwer'. It hopes to expand beyond gyms and fitness centres and into the country's retail sector.

Lashsan said: "We do have a few ideas regarding first-tier retail in Australia, but our plan is to open discussions once the ANS marketing machine kicks in."

He also emphasised the firm's confidence in its domestic expansion, saying: "It doesn't matter who or where the retailer is — if you back your products with effective marketing, any retailer will be prepared to have them on its shelves.

"It's the same with supermarkets and pharmacies. First-tier pharmacies are what we're aiming for, but even if we were to do a deal with Coles or Woolworths in Australia, it would be dependent on the sort of marketing we do.

"We know initial discussions will progress into an agreement after the IPO, and that sort of marketing will open up opportunities with first- and second-tier pharmacies. In the meantime, our aim is to strengthen the ANS brand with online sales that will generate more offline opportunities, such as in health shops and supermarket chains."

ANS also uses a 'capital-light' business model, whereby it outsources production to third parties, such as Sun Health for its protein bars, Maltra Foods for its protein powders, and Nature One Dairy for its formula milk.

Oceanic offering

Considering its upcoming IPO, which is due to take place on April 3, Lashan was unable to reveal more specific details about ANS' expansion and NPD plans.

Australian investment banking firm PAC Partners Securities — whose previous clients include Bubs Australia and Bega Foods — is overseeing the fundraising for the IPO, for which it will be paid a fee amounting to 6% of the total amount raised.

So far, ANS has not made any financial forecasts for this year, after suffering a US$1.45m (A$2.04m) loss in the 2017 - 2018 financial year on the back of US$356,430 (A$502,040) in revenues — a significant drop from US$504,200 (A$710,220) in 2015 - 2016 and US$366,100 (A$515,680) in 2016 – 2017.

Despite the company's focus on Australia and China, however, ANS is eyeing several other APAC markets.

Lashan said, "We are looking at the China market because that is the market we'd initially set sail for, and that includes Hong Kong. However, we do not want to have a China-only focus.

"We have had many enquiries from countries in the APAC region over the last couple of years, and once the new branding has been launched and we have a good steady flow of products into China, we will follow up on those enquires.​"

In eschewing the rush to sell via daigou​, ANS had previously sought to collaborate with Australia’s Port Adelaide Football Club (PAFC) — a pioneer in promoting the Australian Football League (AFL) in China — to gain access to the Chinese market.

The two parties had signed a three-year referral agreement in May last year, whereby the PAFC would "identify potential Chinese business people or other forms of business partners" ​and promote ANS' products.

The ANS would then pay the PAFC a referral fee amounting to 5% of the value of the products sold as a result of such introductions.

However, the agreement did not proceed as planned.

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