Aussie baby milk, vitamin firms get China boost

HEALTH FOOD BOOM: Australian products, like baby milk formula, vitamins (above) and honey, are more popular with Asian customers, as more and more in the region have increased spending power.


    Feb 29, 2016

    Aussie baby milk, vitamin firms get China boost


    ASIAN consumers, especially those from China, are boosting the fortunes of Australian producers of premium baby milk formula, vitamins and honey.

    With their expanding wallets, middle class consumers are fuelling a sharp rise in sales of high-quality products from Down Under, sending profits and share prices of health foods companies - particularly producers of infant milk formula - into unprecedented territory.

    They are led by Chinese consumers fearful of lax food safety standards at home, where cost-cutting by producers has led to deaths and health scares.

    IG Markets' analyst Angus Nicholson noted that Chinese consumers now have "a huge amount of spending power".

    "Given that there has been some questions around - particularly food, health and medical products - there has been an increase in demand for foreign, top quality brands," he added.

    While the focus has been on soft commodities like beef and dairy, smaller Australian-listed firms that produce infant milk powder, vitamin supplements and honey are also benefiting.

    Supplements maker Blackmores last year had the Australian stock market's highest share price, jumping 534.03 per cent to A$217.98.

    Its net profit for the six months to end-December soared 160 per cent, compared with the previous period, driven by sales to Chinese consumers, which made up 40 per cent of its revenue.

    Bellamy's Australia, which sells organic baby milk powder, saw its share price leap more than 700 per cent last year as its net profit spiked by 325 per cent in the second half.

    Such items are seen as trustworthy by the Chinese as they are sold in supermarket chains Coles and Woolworths, Benjamin Sun of digital marketing consultancy ThinkChina said.

    But the baby milk powders' popularity has overwhelmed the supermarket giants, which have imposed two or four-tin limits for each purchase.

    The buying spree is facilitated by a grey market of purchasing agents known as "daigou" who help Chinese customers secure products in Australia and ship them to China.

    There are 5,000 to 10,000 daigou in Australia, Mr Sun estimated, adding they could make an average of A$100,000 (S$100,000) each year.

    Shipping firms charging some A$5 per kg are also easily found in suburbs which are popular with Chinese.

    The daigou market their services through popular messaging app WeChat, with some setting up stores on Alibaba's consumer platform Taobao.