Rethinking risk: Expansion into new markets key to tackle COVID-19 challenges
While the outbreak has heightened the demand of dietary supplements, it has also brought along problems associated with supply chain disruptions and a volatile economy.
Against this backdrop, some industry players have put on hold some business plans while others moved ahead with new plans.
Australia’s Medlab Clinical is an example of the latter, having signed a Heads of Agreement (HoA) with Randall Communications to expand its nutraceutical business in new markets earlier this month.
“I think in this day and age, you have to rethink your commercial process. On one hand, we spoke about less foot traffic going through traditional doctors and pharmacies [due to COVID-19] and so there has to be other opportunities,” CEO Dr Sean Hall told NutraIngredients-Asia.
“And in the case of Randall, most of that was a global opportunity. Randall wants to take us to other economies that were not on Medlab's radar, including India, Eastern Europe, and I think potentially South Africa – territories which we were not focusing on,” he added.
Another expert pointed out that firms making immune health and probiotics products can leverage on the current market demand to seek further growth, especially in China.
“For immune health and probiotic products, I think they can immediately enter China, because there is an immediate need and I think the demand will remain last for a while,” Michelle Huang, analyst at RaboResearch Food & Agribusiness, told us.
In China, e-commerce giant JD said sales of vitamin C has shot up five-fold, while TCM brands Banlangen also performed well.
China’s health foods giant H&H Global also said that there was strong increase in the demand for its probiotic supplements and immune products globally.
Even after COVID-19 has subsided, the trend of consuming health foods is here to stay in China, according to Huang.
She cited an ageing population and China’s 2030 initiative as the main reasons.
“Also, many consumers of health foods these days are gen-z and millennials, and they tend to have sustained consumption behaviours,” she said.
No winning formula
Nonetheless, there is no hard and fast rule to win the game.
“The demand in China is there, but whether a company succeed is up to its capacity and it really depends on how this situation evolves in other countries, especially if the company have sourcing capacity overseas,” Huang said.
On the other hand, Dr Hall said that the current business climate would require firms to rethink their risk appetite.
This is especially so when working with new business partners on little to no in-person interaction due to travel restrictions caused by COVID-19.
“You can check out a company on the surface from what's available in the public domain, but at that point, you still haven’t really put eyes on them, you still haven’t walk through their corridors, you haven’t felt the culture...”
For other nutraceutical firms, diversifying their business to include hygiene products has now become a viable option.
Australia’s herbal medicines firm Brauer, for example, has retooled its facility to produce hand sanitisers.
“This is an extraordinary opportunity for our advanced manufacturing sector to not only diversify their supply but produce incredibly important products for Australia in its time of need,” said Carl Gibson, CEO of Complementary Medicines Australia.
Holista Colltech, Malaysia’s biotech and dietary supplement firm is also another example that has developed hand sanitisers.
Elsewhere in China, infant formula Beingmate has been producing face masks.