With a shift in demand for wellness products, China's reopening...

With a shift in demand for wellness products, China's reopening suddenly has investors excited again - Stock head

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With a shift in demand for wellness products, China’s reopening suddenly has investors excited again

• China’s recent reopening has got investors excited again
• ASX companies like Roolife and EZZ Life Science are expected to benefit
• * reached out to Roolife’s CEO, Bryan Carr

There’s no sugar coating the fact that Australia’s relationship with China has been fractured since the height of Covid in 2020.

But China remains our largest trading partner and in 2021-22, we did almost $300 billion worth of trade with the world’s second largest economy.

It’s also worth noting that despite the political tensions, our two-way trade with China has actually increased, not decreased, over the last couple of years.

Source: Austrade

There’s also been encouraging signs that bilateral relations are starting to improve since Labor came to power in May 2022.

Last month, the Albanese government reached a deal that may lead to the removal of Chinese tariffs on Australian barley.

And last week, in the strongest sign yet the iciness is beginning to thaw, more than a dozen Aussie companies including Rio Tinto and Fortescue Metals headed to China. Trade Minister Don Farrell has also been extended an invitation to visit later this month.

It’s been a long two years for investors, but all of a sudden, the market is starting to get excited again about China.

CEO of Chinese focused company Roolife Group (ASX:RLG), Bryan Carr, said the market has a perception of China that’s often different from reality.

“If you look over the last few years, there’s been plenty of negative headlines about the Australia-China relationship,” Carr explained to *.

“But during that same period, exports to China actually increased despite specific exceptions such as Australian wines. So the actual data doesn’t align with the perception.”

Revenge spending

Carr believes there is now a great opportunity to orientate the story back to China.

“You’ve got a huge country that’s coming out of Covid restrictions, with strong pent up consumer demand and increased savings,” he said.

“And they’re coming out and essentially revenge spending.”

Official Chinese data released in mid April does support that theory.

According to the report, China’s economy grew faster than expected in the first three months of the year, with GDP growing by 4.5%. Meanwhile retail sales, the main indicator of household consumption, also jumped by 10.6% compared to a year earlier.

“There’s definitely surging demand from Chinese consumers, and a greater degree of confidence and optimism from Australian businesses looking to go into China,” said Carr.

Roolife facilitates and accelerates that market entry, providing everything required for a foreign brand (not just Australian) to compete and hit the ground running in the Chinese market.

The company has struck a partnership with the biggest online platform in China, Alibaba, as well as supermarket chain Freshippo Stores (also owned by Alibaba) – allowing its Remedy Drinks range to be available in over 500 physical points of sale across the country.

“What we want people to understand is that the there is still a very strong growth trajectory in China,” Carr said.

“Yes, the growth is not as aggressive as it has been over previous years. But it’s still going to be contributing a third of the world’s growth over the coming year.

“So it’s the right market to be in at the right time.”

Shift to wellness products

Recent data also shows that there’s been a major shift in China’s shopping habits.

According to international consultancy Oliver Wyman, Chinese millennials — those born between 1981 and 1996 — are embracing wellness over luxury products.

Source: Oliver Wyman via Bloomberg

“We’ve very much seen an evolution driven by increased health awareness as a consequence of Covid, where generally people have become more focused on health,” says Carr.

Against that backdrop, Carr is seeing a lot of demand for products like the lower sugar kombucha drink that it sells, as well as supplements and vitamins.

“We’ve also seen very good growth and interest in pharmaceutical products from the Chinese,” he added.

Roolife has made efforts to cash in on this trend by launching its own brand VORA, a 100% plant based protein drink.

“We’ve got the ability to respond very quickly to identify product demand, and to sell it under our own label obviously increases our margins,” Carr said.

Big opportunity in Southeast Asia

Carr also believes the demand in Southeast Asia over the next 20 to 30 years will be extremely strong, and that’s one of the reasons the company launched the VORA label.

Southeast Asia is one of the most significant economic engines in Asia Pacific.

With a total population of almost 700 million people, the so-called ASEAN bloc accounts for a tenth of Asia Pacific’s (APAC) economy in 2021.

By 2030, countries such as Indonesia, the Philippines and Vietnam are poised to see stronger growth than the overall APAC region, including China.

“We see Southeast Asia as a natural extension for us to be able to broaden our offering across the whole of Asia,” said Carr.

“We’re currently looking at Singapore, Thailand, Vietnam and Indonesia for growth opportunities for the particular types of products that we offer.”