H&H Q3: Swisse and Biostime owner reports China probiotics slump, but overall growth in ANZ

By Tingmin Koe contact

- Last updated on GMT

H&H Group announced a decline in their probiotic sales in its Q3 report. ©H&H Group
H&H Group announced a decline in their probiotic sales in its Q3 report. ©H&H Group

Related tags: swisse, H&H Group, Probiotics, Infant formula

Health and Happiness Group (H&H Group), the parent company of Swisse and Biostime, has reported slowing sales of probiotics in China, although growth remained robust in its infant formula and adult nutrition businesses in the first nine month of this year.

The company also saw returning growth in its Australian and New Zealand businesses, driven by its offline retail expansion and its launch of new infant nutrition products.

The Hong Kong Exchange listed company released its Q3 report of its financial performance between January to September yesterday (Nov 16).

Total revenue in the first nine months of this year had declined 1.5 per cent on a like-for-like (LFL) basis to RMB$8.09bn (US$1.27bn).

Probiotics supplement sales were hit particularly hard, declining by 34.2 per cent yoy.

“Following the outbreak of COVID-19 in the first quarter of 2020, we experienced an unprecedented demand for immunity-support, while Biostime-branded probiotics sales in the second quarter of 2020 rose by more than 50 per cent yoy ahead of a scheduled price increase in July 2020.

“The impact of these high base effects started to diminish in the third quarter of 2021, with probiotics sales shrinking 34.2% year-on-year [in China) in the nine months ended 30 September 2021,”​ said Luo Fei, chairman of H&H Group in the Q3 report.

Including markets outside of mainland China, the company’s infant and kids probiotic supplement sales had declined by 33.8 per cent on a LFL basis. 

The company's infant and kids probiotic supplements are sold under the brand Biostime. 

CEO Laetitia Garnier expects the decline to narrow in the upcoming months.

“We expect the sales decline in our probiotics segment to narrow further in the fourth quarter of 2021 and continue to believe that the long-term growth of our probiotics business will be sustained on the back of rising health awareness in mainland China and by Biostime’s No. 1 positioning in the global paediatric probiotic supplements market,”​ she said.

Mainland China is the company’s largest revenue contributor, accounting for about 81 per cent of its total revenue in the first nine months of this year.

As compared to last year, revenue from this region decreased by three per cent on a LFL basis.

Infant formula: Competitive but growing 

In China, the decline in probiotics was offset by robust growth in its infant formula milk (IMF) sales.

Luo said the company had managed to grow its IMF business despite low birth rates.

A reason was due to market demand for its premium goat milk infant formula.

“Despite these headwinds, which is continuing to impact the entire industry, our IMF business [in China] still grew 4.5 per cent during the nine months under review, with sales of our cow milk IMF series growing 0.4 per cent.

“Meanwhile, with the continued premiumisation trend continuing to push up demand for goat milk – one of the most dynamic parts of mainland China’s overall IMF market – sales of our goat milk IMF recorded growth of 67.2 per cent during the nine months under review,”​ he said.

In addition, the company has been expanding its offline presence in China’s lower tier cities.

As compared to the same period last year, the company’s store network of IMF had grown to 73,795 sales points this year.

“This had enabled us to maintain a stable market share in the cow milk IMF market in mainland China.

“In the twelve months ended 30 September 2021, we ranked 7th in the overall cow milk IMF market in mainland China with a market share of 6.1 per cent,”​ Luo said, citing data from Nielsen.

Overall, revenue from the company’s IMF business reported a LFL growth of 5.2 per cent. 

As for its adult nutrition portfolio in China, the sales of Swisse saw a LFL growth of 8.7 per cent. 

Reclaiming Swisse’s leadership in ANZ

Elsewhere in Australia and New Zealand, a LFL sales growth of 3.9 per cent was reported and the firm would continue to reclaim Swisse’s leadership in these markets.

“In ANZ, we will continue to reclaim Swisse’s strategic leadership in the domestic market, with the daigou channel unlikely to return in near future.”

He explained that the growth was due to the firm’s efforts in meeting local demand and expansion in offline stores, such as grocery stores and pharmacies.

Citing research statistics by IQVIA, he said the share of Swisse in the Australian vitamin, herbal, and mineral supplements market was 12.2 per cent for the last 12 months to September this year. 

Considering all markets, sales of the company’s adult nutrition and care products had increased by 5.8 per cent on a LFL basis.

Aside from Swisse, the company also reported growth in ANZ from its children’s nutrition portfolio under the Biostime brand.

This was driven by new launches of IMF and children’s supplements containing human milk oligosaccharides – said to be the first-of-its-kind in Australia.

The product, known as ProBOOST + VIT D,​ contains 2’-fucossyllactose (2’-FL) and vitamin D.

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