Swisse cushions H&H’s baby nutrition challenges by growing double-digit in China
The Hong Kong exchange listed company, which operates adult, baby, and pet nutrition businesses, said yesterday night (Mar 22) that group revenue was up 3.2 per cent to RMB11.5bn (US$1.8bn) in FY2021.
Gross profit was up 0.8 per cent to RMB7.2bn (US$1.1bn).
However, adjusted net profit was down 12.4 per cent, while adjusted EBITDA also fell 10.3 per cent to RMB1.9m (US$290m), with a 16 per cent adjusted EBITA margin. The EBITDA was reconciled by a list of non-cash items such as net foreign exchange, net fair value on financial instruments, and non-recurring items such as restructuring costs.
The company’s adult nutrition and care segment climbed 6.9 per cent in revenue to RMB4.2bn (US$661m).
In contrast, its baby nutrition and care segment was down 9.1 per cent in revenue to RMB6.6bn (US$1bn) – of which revenue from its probiotics portfolio had dropped 30.9 per cent.
The decline was the result of an exceptionally high demand for probiotics in the wake of COVID-19 in 2020, which is now causing the revenue to dip from a high base.
Biostime is the company’s flagship infant and children probiotic supplement brand.
“While we faced industry headwinds, particularly in our mainland China baby nutrition and care segment, we proactively anticipated and responded to market conditions to pursue opportunities across our core markets globally.
“In 2021, we expanded our business footprint through enhancing the unique positioning of our aspirational brands and accelerating the growth of our adult and pet nutrition and care segments and entry into new markets,” CEO Laetitia Garnier said.
Swisse’s growth
Swisse, which is the key portfolio of its adult nutrition business, reported strong growth in China, ANZ, and other regions in APAC.
The Australian heritage brand led a growth of 10.8 per cent for H&H’s adult nutrition business in mainland China.
The growing presence of Swisse’s products in both offline and online channels was a key reason for success.
To penetrate into offline channels, more products under the brand had applied and were granted with the ‘blue-hat’ approvals – a requirement for health foods to be sold offline in China.
As such, the firm was able to secure a 48.7 per cent growth in China’s normal trade channel which includes both online and offline channels.
In Australia and New Zealand, the company has been reaching out to the domestic audience by expanding its presence in the grocery and e-commerce platforms.
“Considering the retail daigou channel is unlikely to return in any significant form in the near term, we are continuing to focus on Australia and New Zealand-based consumers.
“This means expanding our presence in the grocery channel and accelerating our digitalisation strategy, to improve our ecommerce approach. In 2021, these efforts resulted in robust 8.1 per cent and 77 per cent yoy revenue growth in the grocery and ecommerce channels respectively,” Garnier said.
In addition, the brand was launched in 11 new markets in the past two years.
“We are seeing particularly strong momentum for Swisse’s vitamin, herbal, and mineral supplement products in Italy, United Kingdom, Hong Kong SAR, Malaysia and India.
“For example, Swisse is ranked No. 2 in the beauty supplements categories in Italy, as well as in Singapore where it is also ranked No. 3 in the multivitamins category,” she said.
Super premium IMF
The company is shifting its attention to super-premium infant milk formula (IMF) as a growth strategy for surviving China’s competitive market.
In fact, the company is already big on IMFs, with the majority of its revenue – RMB5.1bn (US$808m) coming from this category this year.
While super-premium cow and goat milk infant formulas could drive growth, the company also acknowledged that overall, the infant formula industry in China would become more competitive as more brands enter the market.
“China’s declining birth rate has resulted in a smaller overall market and demand for baby nutrition and care products compared to previous years. To mitigate this, we have proactively expanded our distribution of IMF products into lower tier cities, and focused on categories such as super-premium cow IMF and goat milk IMF.
“According to Nielsen, we increased the retail sales values of our super-premium cow milk IMF and goat milk IMF categories by 22.5 per cent and 33.6 per cent respectively compered to the previous year, achieving third-place market share rankings in both categories.
“This approach enabled us to maintain Biostime’s stable position in the overall IMF market in mainland China…We expect, however, intensifying competition in the IMF industry, and particularly in goat milk IMF as more brands enter the market,” Garnier said.
