On 24 August, Ausnutria Dairy Corporation Ltd. (Ausnutria) announced the acquisition of Australia-based premium nutritionals business Nutrition Care, part of Brighthope International Pty Ltd. (Brighthope). The investment involves Nutrition Care’s businesses and assets at USD20.0 million (AUD26.4 million) and its land and production facilities in Australia at USD3.9 million (AUD5.2 million).

Source: Baidu

Nutrition Care's founder and owner, nutritionist Professor Ian Brighthope, will retain a 25% stake in the business and will take up a post as an advisor. “The localised operation, the key managing team and the business model will be retained alongside the original site,” stated Ausnutria: “Besides, we will increase investment in R&D and will continue offering quality, high efficacy and natural nutritionals to consumers.”

Ausnutria will take on Nutrition Care's assets which include:

• Its accreditation with the Australian government's TGA (= Therapeutic Goods Administration), its intellectual property rights, clients, stocks, production facilities and buildings

• R&D, production and OEM (= Original Equipment Manufacturer) contracts for healthcare products, dietary supplements and herbal formulas

• Services and education activities related to complementary therapy, herbal formula and healthcare products

Nutrition Care was established in the 1970s, and achieved TGA accreditation for production and processing in 1998. It is the only premium-marketed nutritionals brand having its own plant in Australia, with a portfolio spanning fish oil, vitamin additives (such as Vitamin E / C / Q10) and healthcare medicines for liver, weight reduction, beautification and detoxification.

This is a significant step by Ausnutria in internationalising and also diversifying its business in the rapidly growing international nutritionals market to complement its established infant formula business.

In 2015, the company declared its aspiration to be an “internationally leading infant formula and nutritionals supplier, and the most reliable nutritionals & health consultant to consumers”, so the deal is not a surprise, especially since it was known to be in preparation since June.

It comes on the back of Ausnutria's strong H1 figures, with YoY rises of 37.1% and 150.7% in sales and net profit respectively (please see Ausnutria: Sales to Rise by 37% in H1 on P6 Dairy Products China News August 2016).

“Our infant formula business performed well in H1,” stated Yan Weibin, Ausnutria’s Executive Director; “If we have Nutrition Care’s certified production facilities, its rich product mix and its professionals’ knowhow, our nutritionals business will also develop well.”

                                                          Ausnutria’s financial performance, H1 2012-H1 2016

Ausnutria is not the only Chinese company pushing into the international nutritionals market. For instance:

• September 2015 – Biostime International Holdings Limited (Biostime) spent USD989.8 million (HKD7.7 billion, USD/HKD exchange rate @ 7.7552 on 5 September, 2016, sourced on hexun.com) acquiring 83% of shares in Swisse, outbidding Chinese private equity firm Hony Capital and drug manufacturer Shanghai Pharma to take over the Australian healthcare brand which had developed strong sales in China on Tmall and Taobao (and of course Biostime actually began in infant supplements before moving into infant formula)

• June 2016 – New Hope Group acquired Australian NaturalCare Pty Ltd.

• August 2016 – Shanghai Pharmaceutical Holding Co., Ltd. noted its decision to acquire a 60% stake in Australian Vitaco Holdings Limited at USD140.5 million (RMB938 million), a process still underway

Biostime’s financial report shows that its nutritionals business has been a key contributor - the sales of its adult nutritional and nursing products were up by 34.9% YoY to USD193.7 million (RMB1.3 billion), making up about 43% of its sales mix, and the company almost doubled its net profit for the period - the company attributed this rise to the acquisition of Swisse.

Ausnutria will be looking to emulate such performance, but success is not a given:

1. Swisse is a brand which had already become well recognised by Chinese consumers – not all acquisitions of foreign nutritionals brands will bring the same results.

2. China's healthcare market is marked by increasingly fierce competition, with many overseas brands entering. Moreover, the Administrative Measures for Healthcare Food Registration and Filing which was implemented on 1 July, lowers the threshold for market entry (A new system of dual-regulation –"registration + documentation" – has been introduced to the domestic health food market, replacing the previous registration system. The documentation mechanism is a particular highlight of the reforms.

After receiving dossiers from applicants, the food and drug administrative departments make a record of those which immediately meet requirements, issue documentation certificates for them and make documentation publicly available on official websites. The new registration procedure is also simpler than previous ones, saving companies’ time. The implementation of such policies could well persuade some pharmaceutical enterprises to enter the health food industry, intensifying competition as a result). 

3. Currently, foreign brands are mainly marketed online. Given stricter controls on cross-border E-commerce business, this type of business will increasingly be under scrutiny.

4. This is a fast-changing category where the constant evolution in consumers’ preferences and who those consumers actually are provides an ongoing challenge: for instance, in the past, the elderly population constituted the main consumers of healthcare products in China, but now sports nutrition and beauty-maintenance products have become increasingly popular amongst the young crowd.

This article comes from Dairy Products China News 1609, CCM

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Tag: Dairy

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