Feihe financials: Infant formula brands Astrobaby, Organic Zhenzhi soar in China, but US supplements sales slump

29-Mar-2021 - Last updated on 29-Mar-2021 at 01:29 GMT

Ninety-five per cent of Feihe’s revenue came from the infant milk portfolio last year. ©Getty Images

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China infant formula firm Feihe said the popularity of its brands Astrobaby and Organic Zhenzhi have helped increase revenue for its infant milk portfolio by 41 per cent in FY2020, but its US dominated supplements business had plunged by 46 per cent.

The majority (95 per cent) of Feihe’s revenue came from the infant milk portfolio last year, followed by other dairy products at 3.3 per cent, and supplements at 1.7 per cent.

Its leading brand Astrobaby (星飞帆in Chinese) is categorised as a super-premium brand.

Launched in 2010, its key ingredients include OPO, hydrolysed whey protein, and alpha-lactalbumin – a protein found in breast milk.

The other bestseller brand, Organic Zhenzhi (臻稚有机) is said to contain organic lactose, demineralised whey protein, DHA and ARA. It was launched in 2017.

Both are stage three formula for infants and toddlers 12 to 36 months old.

Its infant formula business is concentrated in mainland China.

Overall, the company’s total revenue last year was up 35.5 per cent to RMB$18.5bn (US$2.85bn). Gross profit climbed 40.3 per cent to RMB$13.4bn (US$2.07bn)

Aside from infant formula, the company also sells dairy products for children and adults, as well as health supplements, which contributed to 3.3 per cent and 1.7 per cent of the total revenue last year.

Revenue for the former was up 0.3 per cent, and the latter dropped by 46.1 per cent.

Its health supplement business is concentrated in the US, having acquired the retail health care business of Vitamin World USA in 2018.

It said its health supplement business contracted due to a decrease in consumer traffic and closure of stores in the US. Aside from the 62 outlets, the products are also sold via Amazon, Tmall Global, and JD etc.

Offline retail

Feihe said that a large part of its infant formula was sold via offline channels.

In fact, offline retail accounted 86.4 per cent of the total revenue last year.

This was achieved via over 110,000 retail points, including maternity stores, supermarkets, and hypermarkets.

Its online retail, on the other hand, is mainly to target younger consumers, the company said. It is present in Tmall, JD, Suning, its own website and Wechat app etc.

The positive performance of both Astrobaby and Organic Zhenzhi showed that there was “enhanced recognition of the Group’s brand”, the company said.

The company has eight other infant and toddler formula brands. Of which, two were launched last year, they are Organic Chunrui and Miao Shu Huan, with the latter

It also launched a product branded Zhuoran for children aged three to six last year. Containing FOS as prebiotics, α-lactalbumin, DHA, ARA, vitamin D, vitamin A, lutein, it is said to produce immuno-modulating effects.

The company is expanding one of its production facilities and constructing a new facility.

As of Dec last year, it has eight production facilities to manufacture products for annual production capacity of 232,400 tonnes in total.

Factors for growth

Growing disposable income in lower tier cities and rural areas is a factor that will drive infant formula sale despite declining birth rate, the company said.

“These regions have larger populations and therefore higher potential for consumption growth,” the company said.

In addition, the low rate of exclusive breastfeeding, a preference for local brands and premium products will continue to put the company in good stead, it said.