The company also said that market headwinds in mainland China’s infant formula space would “remain acute for longer than expected.”
The company announced that revenue from its paediatric probiotic and nutrition category slid 45.3 per cent to RMB$169.4million (US$23.2m) in Q3, while that of its infant formula shrunk 20.6 per cent to RMB$930.9 million (US$127.7m).
Still, in the first nine months of this year, revenue from its paediatric probiotic and nutritional supplements went up 12.9 per cent to RMB$912.9million (US$125.2m).
Much of the decline in Q3 came from mainland China, which is the firm’s biggest infant nutrition market.
Lower traffic in the pharmacies was one reason for its decline in paediatric probiotic revenue.
“Sales of paediatric probiotic and nutritional supplements in mainland China during the third quarter of 2023 declined by 45.6 per cent due to customers’ need for destocking and lower traffic in the pharmacy channel for immunity related products post peak time of COVID.
“However, we continued to gain market share in both e-commerce and pharmacy channels during this period. This performance fortified Biostime’s status as the leading paediatric nutritional supplement brand in mainland China,” according to chairman Luo Fei.
Luo acknowledged that market headwinds in China’s infant formula segment would likely continue. Nonetheless, he believes this would be partially offset by the performance of its probiotics and nutritional supplements segment, which the company has been building on.
For instance, the company launched new children supplements under the Biostime brand, such as DHA, lutein, and vitamin D targeted at children zero to six years old.
It also launched Little Swisse which captures a wider age group from age three to 12.
In the first nine months of 2023, the group’s total revenue climbed 11.9 per cent to RMB$10.3 billion (US$1.4bn).
Revenue from its nutritional supplements was up 31.4 per cent to RMB$6.3bn (US$865.2m) in the same period. In Q3, this was up 13.8 per cent to RMB$2.1bn (US$290m).
A breakdown shows that revenue from its adult nutritional supplements was up 26.1 per cent to RMB$1.6bn (US$225.5m) in Q3.
Expanding global footprint for IMF
As for its infant milk formula portfolio, H&H Group will focus on expanding the global footprint of its business.
“With regards to our Baby Nutrition & Care, we've been strategically enhancing the international footprint of our IMF business by launching innovative products to build recognition and trust,” said Group CEO Camillo Pane who joined in September.
An example is its launch of Inostime in France, an infant milk formula series enriched with lactopontin (LPN) – a crucial component of breast milk and has been studied for its immune health benefits.
Mainland China still pivotal market
Mainland China is still a pivotal market for H&H Group, accounting for 70.7 per cent of overall revenue. It reported a 6.9 per cent yoy growth for the first nine months of 2023, but saw a decline of nine per cent in Q3.
A growth driver in mainland China is its adult nutrition portfolio, which the firm said was “driven by robust consumer demand for beauty, multi-vitamins and detox products, as well as new product launches within innovative categories."
For instance, it has expanded into Swisse Plus+ and Swisse Me to better capture demand for premium nutritional products from different consumer audiences.
“We are seeing signs of success in capturing demand for premium nutritional products, with Swisse Plus+ accounting for a high single-digit percentage of total ANC (adult nutrition and care) revenue in mainland China in the Relevant Period following its launch in the third quarter of 2022.”
Normal trade is one of the fastest growth sales channels for the company, recording 74.1 per cent yoy growth and accounting for 23.8 per cent of the company’s adult nutrition revenue in mainland China.
As part of its diversified sales strategy, Pane said the company would also expand its footprint in cross-border e-commerce.
Elsewhere in Australia and New Zealand, the firm has seen growing demand for immune, beauty-from-within supplements and general wellness-supporting products.