What’s up with Swisse Fuels’ vitamins business?

 
Swisse Fuels’ vitamins group produced fivefold surge in profits for its new owner Biostime International in its first three months of 2016 as part of the group and the brand is now the No.1 healthcare brand on the big Chinese online sites of Tmall and Taobao. The financial performance had previously been private before the acquisition of the company by Biostime (listed on the Hong Kong Stock Exchange), but has now been reported in the full-year results of the parent company for 2015. Total sales of Swisse products rose 60% in said period. As per the latest financial data, Biostime’s profit for the three months ended March 31, 2016 is reported to be 429.3 million yuan with the adult nutrition business witnessing revenue surge by $US34.7 million in the period of January to March.
 
Earlier, the financial statements revealed that for the three months ending 31 December 2015, revenues were approximately $ 169 million at the current exchange rate, and if this is extrapolated to a full-year contribution, it would be close to the annual sales of its rival Blackmores listed on the ASX.Blackmores reported in February that half-year sales for the six months ended December, 31, 2015 had grown 66% to $342 million and that net profit had risen to $48.3 million on the back of strong demand from China. The financial statements also showed that the final price Biostime paid for 83% of Swisse acquired in the fiercely competitive battle for the stake was $ 1.45 billion, and that the loan of $ 164.3 million made before the acquisition was part of the total funding. The Biostime statements also showed that the company has spent $ 13 million on acquisitions related costs such as cost to investment bankers and lawyers fees and these costs had contributed partly to an overall decline in net profit of 64% to roughly $ 59.1 million for 2015, even though revenues grew by 1.3%. The company is also involved in the infant formula and organic baby food businesses.
 
Swisse has decided to go directly to the market in China in 2016, which is an online presence of its own with a substantial marketing budget, which includes ambassadors of the likes of Nicole Kidman and Ricky Ponting. It hopes to capture more profits which are currently going to intermediaries. It is currently the top brand in online sales in China in 2015, with sales of three times that of the largest selling global brand GNC and double the size of the largest Chinese competitor. The strategy is currently being finalised and a core strategy in the plans is to allow Chinese consumers the opportunity to relate directly to the brand.
 
The strong growth in China in 2015 was substantially because of Chinese entrepreneurs travelling to Australia to purchase large quantities of products and shipping them back to China to sell through their own online e-commerce operations. These intermediaries added their own margin of profit and helped to generate increases in sales because of robust demand for clean and green vitamins. However, the company will preserve the existing market channels which have been developed by the intermediaries and distributors online in China, but the new strategy should drive even stronger growth. Official economic data from China showed strong demand in the Chinese healthcare and finance sectors, helping the economy to expand by 6.9% last year. Blackmores has also benefited from the demand for well-known brands from the West with the reputation for quality and a strong supply chain. However, Blackmores reported for a slow sales start for the year for its jointly branded infant formula venture with Bega Cheese.