H&H Q1 financials: Immune health and probiotics sales dip, infant formula demand remains buoyant

The group, which owns eight nutrition and wellness brands across the globe, reported Q1 revenues of RMB$2.3bn (US$363m) – a decline of 5.9 per cent from the same period last year.

According to the company, this was largely due to a weaker demand for immune health and probiotics products.

“This was mainly attributable to a high base caused by an uplift in demand for immunity-related products across our Baby Nutrition and Care (BNC) and Adult Nutrition and Care (ANC) segments in the first quarter of 2020 following the outbreak of COVID-19, especially in China, our largest market,”​ the company said in its operational statistics report. 

In contrast, revenue from its infant milk formula under the Biostime brand had increased by 9.2 per cent, with significant growth from China, France, and Australia.

In China, the revenue growth was 8.4 per cent, due to a deepening market segmentation between cow milk and goat milk, where sales of goat milk soared 96.3 per cent and cow milk up 3.8 per cent.

H&H Group CEO Laetitia Garnier also attributed the performance in China to the success of the company’s new channel expansion strategy.

“Store coverage across the region has continued to increase and we have made positive shifts in our market share also,” ​she said. These stores include baby products specialty stores and offline channels in lower-tier cities.

However, overall, the Group’s Baby Nutrition and Care revenue still contracted by 2.6 per cent as compared to the same period last year due to weaker probiotic sales.

In fact, the Group’s revenue from probiotic supplements saw a 36.6 per cent slump overall, again due to unusually high purchase volume for probiotics last year.  

Nonetheless, the company emphasised that the long-term growth of its probiotics business will be sustained by rising health awareness in China and Biostime’s leading position across the global paediatric probiotic market.

Adult nutrition ​

H&H said it would work on meeting local demands to grow its sales of ANC portfolio in Australia and New Zealand, while in China, it will introduce more blue hat certified products.

Overall, the company’s revenue from its adult nutrition portfolio declined 13.9 per cent in Q1 as compared to the same period last year.

A few factors were highlighted, including a high-base sales effect from consumers’ stocking up of supplements pending a lockdown. A weak daigou market due to limited international travel also impacted sales in Australia and New Zealand.

In these two countries, revenue from adult nutrition shrunk by 18.8 per cent, while in China, the revenue had contracted by 10.8 per cent.

Being the company’s biggest adult nutrition market, China accounted for 53.4 per cent of the company’s total ANC revenue in Q1.

To drive sales in China, the company said it would focus on putting more Swisse products for “blue-hat” certification, so that it could sell the products in China’s fast-growing normal trade e-commerce platforms.

Earlier on, the company had also identified plant-based​, beauty-from-within and immune health, and mental wellness​ as its key R&D priorities. 

In light of the 5.9 per cent drop in revenue for the first quarter of this year, all eyes will be on the half-yearly update when the company also reveals its profits figures.

At the half-year stage in 2020 it reported total revenue grew 2.6 per cent on a like-for-like basis to RMB5,167.2 million, while net profit grew 8.9 per cent on a like-for-like basis to RMB658.3 million.