Australian formula firm ViPlus remains confident amid China's desire to boost domestic brands

By Cheryl Tay contact

- Last updated on GMT

Despite China's continual tightening of the rules, ViPlus has decided to adhere to its tradition of manufacturing all its products in Australia for both domestic and overseas sale.
Despite China's continual tightening of the rules, ViPlus has decided to adhere to its tradition of manufacturing all its products in Australia for both domestic and overseas sale.

Related tags: Australia, China, Dairy

Australian formula milk firm ViPlus Dairy is confident its business in China will continue to grow, even as the Chinese government aims for 60% of all infant formula consumed in the country to be domestically produced.

In 2017, the company — which specialises in milk powder products for different needs and life stages — became the first Australian formula maker to have its locally manufactured infant formula products approved for sale in China, under stricter regulations that were officially implemented in 2018.

Not rattled by regulations

Despite China's continual tightening of the rules, ViPlus has decided to adhere to its tradition of manufacturing all its products in Australia for both domestic and overseas sale.

International sales manager Chris McKiernan told NutraIngredients-Asia​: "Our factory is located in the heart of dairy country in Gippsland, and the fact that we produce milk powder from sources in and around our factory is one of our key selling points. We don't want to lose that distinction."

He added that apart from initial uncertainty, China's regulatory changes had not negatively impacted the company. China continues to be its largest export market, accounting for approximately 80% of its revenue.

"Our business has increased since 2018 and we've found that it's because there's been some moderation in the market following the regulatory changes last year. The number of brands have decreased, from over 2,000 to around 500 brands now, giving the consumer more clarity," ​he said.

In fact, according to CEO Jon McNaught, the company has "basically doubled the size of the business every year since 2014"​.

Perhaps what is even more unusual is that ViPlus has so far eschewed the daigou​ platform that many Australian businesses have embraced, preferring instead to focus on offline retail in China. Up until Christmas last year, the company had not even been selling via cross-border e-commerce to China.

McKiernan explained that the firm had always insisted on coordinating its online and offline strategies in each of its markets, and preferred to work with direct importers instead of local traders.

However, he also said that as its e-commerce business in the country grew, the firm would consider using daigou​ in future.

Asian diversification

ViPlus' insistence on working with direct importers instead of local traders, McKiernan said, was a way to "lower our margins and cut through the layers of distribution and trade"​.

"The direct importers we work with have their own e-commerce and sales teams, as well as warehouses in each country, from which they can distribute directly to the local retail outlets.

"In this aspect, we've spent some time working with the Australian government, as well as inbound and outbound trade missions, to find the right people. Dealing with importers for our branded products has really grown our business in the retail sector overseas, so that's a prerequisite for any country we enter now."

The firm, which is in its sixth year of operations, currently exports to China, South Korea, the Philippines, Syria, Thailand, Hong Kong and the Middle East.

It aims to have a presence in 16 South East Asian markets by the end of the year, using both online and offline retail channels, such as RedMart, Lazada, Shopee and NTUC FairPrice in Singapore, where it will launch in June.

Apart from its milk powder products for mothers, infants and young children, however, ViPlus has diversified its portfolio, and is adapting it to better meet consumer demand in its respective markets.

For instance, the firm's Singapore launch will not include mother and baby products in its first phase, but will instead focus on bringing ViPlus Diary's functional products for adults to the country.

These include Gold 40+ Adult Nutritional Formula and Gold 60+ Adult Nutritional Formula, as well as a collagen-rich beauty formula, meal replacement formula and goat milk formula, among others.

The firm will be launching on e-commerce site honestbee in Malaysia in July (with a focus on its goat milk powder products to meet consumer demand), as well as the Middle East in the same month.

In September, it will bring its infant formula products to Myanmar.

McKiernan said: "We feel the South East Asian market should be a big focus, given the growth of the middle class in that region. This enables Australian producers in the infant nutrition and milk powder space to be much more competitive."

ViPlus is also looking to expand in Hong Kong via pharmacies and specialty stores, and will be introducing a private-label toddler formula in Pakistan via a contract with infant formula firm Sante London, which also exports to other parts of South Asia.

Tech advantage

To support its portfolio diversification and global expansion, ViPlus recently incorporated a "state-of-the-art"​ spray dryer into its factory operations, enabling the firm to convert fresh milk into dried milk powder.

McKiernan said, "The patented spray-drying technology we use is much more energy-efficient (than conventional spray dryers) and will minimise water waste, which is in line with our goal of greater sustainability.

"Traditionally, the time taken to convert liquid milk into powder form via spray-drying can have an impact on the nutritional value of the milk, but we've made the process a lot quicker, which means the vitamin and mineral content of our milk powder products will be maintained."

He further revealed that ViPlus was considering developing more formulations for specific dietary requirements across all life stages, as well as ready-to-drink formulations.

The company recently upped its permanent employee count to 72 after hiring 24 new workers in May and June, and plans to hire an additional 17 employees by the end of July to better handle growing demand.

In addition to its spray-drying technology, ViPlus has also commissioned two new manufacturing lines and added extra shifts at its plant in Victoria.

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