This will be our next Big Stagger for an IPO. Blackmore's shares more than doubled in the last 6 months. Citi and Jp Morgan would be running this show. Cheers. Chinese vitamin demand soars
China’s huge appetite for ‘‘clean and green’’ vitamins is giving Australian health supplement makers a healthy boost.
Blackmores’ shares have doubled to $91 in the past six months to give the group an ASX market capitalisation of $1.5 billion. Swisse Wellness is experiencing a revenue surge as its tests the market for a potential $1 billion-plus sale, and Vitaco is preparing to a stock exchange list in a $250 million float.
One of the main drivers of growth is the appetite for ‘‘clean and green’’ vitamin and health supplements in China. Thousands of online shoppers in Shanghai and Beijing are buying the trusted Australian and New Zealand brands, with sales of some Australian brands jumping 10-fold in 12 months.
Chinese expatriates living in Australia are also buying vast amounts and shipping them back to relatives and friends in China who’ve been unnerved by food contamination scandals locally in frozen berries, infant formula and milk powder. Tourists from China visiting Sydney and Melbourne are also snapping up large volumes.
Ryan Lin, senior industry analyst with IBISWorld, says many city-based retailers who stock Swisse and Blackmores, often sell out of product. ‘‘We’re seeing a lot of demand from Asia because of the reputation of Australia’s clean manufacturing of food products.’’ It may be a long time before sales of the Wagner Green-Lipped Mussel capsules which form part of the Vitaco stable begin to rival the revenue from iron ore sales from the Pilbara region in Western Australia, as giants BHP Billiton, Rio Tinto and the private operations of billionaire Gina Rinehart claw the lion’s share of Australia’s $50 billion-plus in annual iron ore exports.
But the market for vitamins and health supplements is vast in China and has doubled to more than $17 billion annually in the past seven years. Competition is fierce as big multinationals around the world clamour for a bigger slice, and the Australian operators are enjoying the after-glow. Blackmores shares have jumped from below $45 in February to about $91, and in an update in May it referred to Asian sales being up 44 per cent. Once Thailand sales were stripped out, the rise in Asia was 90 per cent. Goldman Sachs analyst Andrea Chong in a research note on July 14 said the share price surge was largely because Blackmore’s sales in China had jumped 10-fold in a year and were now at an annualised $100 million, making up 20 per cent of the company’s total sales.
She concluded Blackmores could achieve a 10 per cent share in the vitamins e-commerce market in China by 2017, with China sales making up 30 per cent of Blackmores’ total by then.
Swisse executive chairman Trevor O’Hoy has also pointed to the extraordinary demand from China for a strong lift in sales. Now Vitaco is preparing to ride the wave. The business was formed in 2007 through the merger of Healtheries and Nutra-Life. Private equity firm Next Capital holds 71 per cent and the firm’s brands include Nutra-Life, Wagner and Abundant Earth. It runs three manufacturing plants in Auckland, New Zealand. It also make sports nutrition products. Investment banking firms Citigroup and JP Morgan are doing the rounds of fund managers on a roadshow, with the business expecting $27.5 million in earnings before interest and tax, depreciation and amortisation for 2015-16.
Mr Lin says when the GFC hit in 2008 people backed off spending on highquality vitamins and health supplements. But the focus on health, wellbeing and fitness, the expansion of space allocated to vitamins in big supermarket retailers Coles and Woolworths, and rise of category killer chains such as the Chemist Warehouse have fuelled strong growth. ‘‘Being in supermarket aisles means people buy them like they do other grocery items,’’ he says.
Blackmores has 350 employees based in Asia and signed a deal in April in Shanghai with retired tennis star Li Na, who is now a ‘‘brand ambassador’’ for Blackmores. Li Na has enormous cache in China as the first Chinese player to win a gra
