Sprouting up: Aussie plant-based formula firm Sprout Organic on Malaysia, Saudi expansion
Founded in 2020 by an Australian husband-wife duo seeking to address the market gap for plant-based options for children, Sprout Organic specialises in organic, plant-based infant formula and snacks for kids, ranging from snack bars to nutrition shakes.
Nadia Schilling, Director of Sprout, said that demand for organic baby products continued to grow.
“Parents are becoming more aware of the potential risks associated with conventionally grown and processed foods, and as a result, they’re seeking out organic baby food that is free from harmful pesticides, herbicides, and other chemicals.
“In recent years, there has also been a growing concern among parents about the rising prevalence of food allergies in children. According to the Centres for Disease Control and Prevention (CDC), food allergies among children have increased by approximately 50% in the last two decades, thus parents are increasingly interested in allergy-friendly baby food.”
Currently, sprout’s products are distributed in Australia and New Zealand, both on-shelf in over 1,000 stores and via e-commerce. It also distributes to over 27 countries online.
The brand recently announced it is expanding operations into Malaysia and Saudi Arabia.
Rationale for entering Saudi Arabia and Malaysia
"With the help of industry data provided by Euromonitor, the Infant Nutrition Council, and Austrade, we conducted a study comparing a set of criteria to determine which markets would be the most favourable for Sprout to enter.
“We compared market sizes, growth forecasts, birth rates, gross net incomes, tariffs, as well as our own ecommerce revenue from overseas markets.”
Schilling added that it had taken regulatory issues into consideration when planning for the market launches.
“These overlays are important, since infant formula is technically a restricted product which can’t be freely exported unless it meets each country’s specific requirements. Some countries’ compliance hurdles are higher than others. The U.S. for example takes approximately 18 months, whereas countries like Saudi Arabia can take as little as 8 months,” she said.
As for Malaysia, the brand saw a burgeoning market potential for infant formula given the country’s higher-than-global-average birth rate and a growing middle class.
Notably, she said that Malaysia has “a well-established distribution network for infant formula, with a variety of retail channels available” which allows manufacturers to access a wide range of consumers, thereby increasing their market share.
Overcoming challenges with expansion
With regards to halal certification in these markets dominated by Muslim consumers, Schilling said that the certification process was “a relatively simply process” given that their entire product range is plant-based, certified vegan, and does not contain ingredients with alcohol derivatives.
“In order to sell infant formula in Malaysia, manufacturers must obtain a licence from the Malaysian Ministry of Health, which can be a complex and time-consuming process. Companies must be prepared to provide detailed information and documentation, and work with local partners to navigate the licensing process.”
Other challenges include navigating cultural nuances when marketing their products to a diverse country, as well as managing issues with counterfeit products.
For the latter, Schilling said: “We’ve taken steps to implement strong traceability systems in addition to packaging which is very difficult to replicate. Thankfully we’ve been able to navigate these challenges with the support of our Malaysian distribution partner.”
Accelerating expansion in APAC
The firm is now exploring Japan, South Korea, and Singapore.
“The dairy-free infant formula market in the APAC region is expected to grow at a compound annual growth rate (CAGR) of around 14.5% between 2021 and 2026.
“This is being driven by a combination of factors such as increased awareness of cow's milk protein allergy, concerns about the use of antibiotics and hormones in dairy products, and the health, ethical, and sustainability benefits of plant-based foods,” Schilling explained.