Retail News CRM

Author: Mei Ling Tan

  • McDonald’s Hong Kong Celebrates Chinese New Year with song

    McDonald’s Hong Kong Celebrates Chinese New Year with song

    Of the abundance of Chinese New Year campaigns by brands this year, McDonald’s Hong Kong has released a touching campaign that tugs at the heartstrings with the help of a classic by Sir Elton John.

    Cantopop star and actor Eason Chan (who once performed, sort of, with Madonna) sings Elton John’s Your Song in a campaign called #LittleBigMoments, which shows McDonald’s fans of all ages enjoying sharing French fries, a burger, ice cream and more, while emotions run the gamut from sadness to joy, tears to laughter, by babies and elderly women and all ages in between.

    Released on Feb. 15th, it has received more than 2 million views across digital channels, including almost 1.5 million views just on YouTube.

    “As a brand, we understand that life is not just one big thing, but the accumulation of a million little things, a million little moments. And in the end, it is these little moments that make life big,” said Randy Lai, CEO of McDonald’s Hong Kong. “It’s been a real privilege to work with Eason Chan, and with the blessing of Sir Elton John, to create a campaign that is a love song dedicated to our customers.”

    “Nothing stirs the heart like a great piece of music, and this is something our industry often forgets,” added Andreas Krasser, Head of Strategy & Innovation at DDB Group Hong Kong.

    “In this campaign we made the music the hero, with Eason Chan lending a homegrown twist to one of the world’s most beloved songs. Since launching on the 15th February, the brand spot has already garnered more than 2 million views across multiple digital channels, successfully reaching around one-third of Hong Kong people,” he added.

    The #LittleBigMoments campaign led with a 60-second brand spot, followed on February 20th by three 15-second stories (below), each focusing on some of the moments portrayed in the brand piece, but also on some of Hong Kong’s most popular McDonald’s menu items:

    Egg & Beef Burger (imported from Japan):

    Grilled Chicken Burger:

    Chicken Nuggets:

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  • BreadTalk Group posts a positive profit growth

    BreadTalk Group posts a positive profit growth

    With a record 91 per cent profit growth, lifestyle F&B company BreadTalk Group says it is ready to soar in a challenging market.

    Its record net profit for last year came in at US$21.8 million despite an “unpredictable” macro retail environment, says the Singapore-headquartered company.

    “We are well positioned to soar above the challenging retail market conditions,” says chairman Dr George Quek.

    “The group remains determined to identify innovative food concepts and partnerships, delivering them promptly across our 17 territories.”

    In line with the group’s consolidation strategy for the year, group revenue eased 2.5 per cent to $599.7 million.

    For the same period, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 3.5 per cent to $84.4 million, with EBITDA margin steady at 14.1 per cent.

    Profit after tax and minority interests (PATMI) improved 91 per cent from $11.4 million to $21.8 million. PATMI margin rose from 1.9 to 3.6 per cent.

    During the year, $9.3 million in net capital gain was recognised from the divestment of the group’s investment in TripleOne Somerset in the first quarter.

    Excluding one-off items, core F&B business net profit for the year would have been $17.7 million, an improvement of 153.3 per cent.

    Bakery less bouyant

    Bakery-division revenue declined 3.2 per cent to $297.2 million, attributed to lower revenue from directly run stores in Beijing, Shanghai and Hong Kong, as well as lower franchise revenue from China because of the planned early termination of eight franchisees during the year.

    There were 20 fewer directly run stores at 240, following the reclassification of the eight outlets in Malaysia in the fourth quarter to franchise, as well as closures in China and Singapore.

    Franchise outlets ended the year at 631, 29 more because of the addition of the re-classified outlets from Malaysia as well as more outlet openings by franchisees in Indonesia, Philippines and Thailand.

    EBITDA for the division declined 20.5 per cent to $23.2 million, with EBITDA margin at 7.8 per cent, down from 9.5 per cent, mainly because of lower profitability at Shanghai and Singapore directly run stores, and lower high-margin revenue contribution from the China franchise business.

    For the food atrium division, revenue was 5.4 per cent lower at $149.3 million with four fewer outlets. The same-store sales growth momentum for the entire food atrium portfolio was strong, especially in China. Two outlets opened in Shenzhen during the fourth quarter, at MIXC World and Uniwalk.

    EBITDA improved 53.7 per cent to $25.1 million, with EBITDA margin improving from 10.3 to 16.8 per cent.

    London debut

    For the restaurant division, revenue was up 2.2 per cent to $140.7 million, with one outlet being added in Thailand. EBITDA rose in tandem by 2.1 per cent to $30.1 million with EBITDA margin steady at 21.4 per cent despite costs related to the start-up of the group’s first Din Tai Fung outlet in London.

    A new business division, the 4orth Division, was launched with the objective of incubating F&B concepts, as well as enter into joint ventures. The division ended the year with revenue of $7.9 million and EBITDA of $500,000, translating to an EBITDA margin of 6.8 per cent.

    “Significant” efforts were put into consolidating and turning around the group’s bakery business, particularly underperforming stores in China and Singapore. Also, the Toast Box product in China was revamped to better suit the local palate and to meet the consumers’ mobile lifestyle.

    BreadTalk’s food-atrium division ended the year with a record low stall vacancies of less than 2 per cent.

    The management team is also staying focused on deepening reach in Singapore and Thailand to further optimise economies of scale. Two outlets were opened last month, at the new Northpoint City in Singapore and at Thonglor in Bangkok.

    All five Ramen Play outlets were rebranded as So, turning the business profitable. The group’s first JV, Song Fa Bak Kut Teh outlet at Jing An Kerry Centre in Shanghai officially opened last month, to be followed by further Song Fa outlets in other parts of Shanghai as well as in other cities in China and Thailand.

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  • Walmart sales taps US$500 billion

    Walmart sales taps US$500 billion

    Walmart sales reached US$500.3 billion last year, an increase of $14.5 billion, or 3 per cent.

    But that failed to excite shareholders, with the share price shedding 10 per cent of its value immediately after the announcement.

    Arguably, the world’s largest retailer’s biggest success last year was its e-commerce business where it is looking to take market share away from Amazon – just as Amazon is trying to encroach on the brick-and-mortar space in the US.

    E–commerce sales rose 44 per cent for the full year, although growth slowed from 50 per cent to 23 per cent in the last quarter, partly due to the annualisation of its year-old Jet.com acquisition. It forecasts 40 per cent growth in the current quarter.

    Neil Saunders, MD of GlobalData Retail, says Walmart has more work to do to widen its e-commerce customer base.

    “There are many demographics, especially younger and professional segments, for whom Walmart is not the destination of choice online. This isn’t because it doesn’t sell what they want or because the price or delivery options are suboptimal; instead, it is because they do not associate Walmart with online or they default to Amazon. This is a tough nut for Walmart to crack, and one that it can only break by more heavily marketing its services and proposition.”

    While figures for the Walmart China business were not broken out, the international division posted 6.7 per cent year-on-year growth in the latest quarter. China and Mexico were the star performers and Walmart’s troubled UK grocery chain Asda showed long-awaited improvement.

    Bottom line blues

    The weakest part of Walmart’s figures was on the bottom line. Consolidated operating income was $20.4 billion for the year, a decrease of 10.2 per cent, however the company says that when one-off impairments and costs are taken out of the equation, operating income would have been “relatively flat”.

    Saunders says there is no cause for alarm over the bottom line performance. “Walmart remains comfortably profitable and much of the deterioration is down to the various investments Walmart is making in future-proofing its business. We applaud this long-term view, especially as it is now being coupled with some rationalisation and streamlining initiatives.”

    Meanwhile, a solid US market performance reflects higher customer traffic and higher average spend.

    “Part of this is down to a more optimistic and carefree consumer, who was in a mood to spend over the holidays.

    Arguably those shoppers did not have to visit Walmart – but many did, and from our data, Walmart increased its share of shoppers over the final quarter. We believe this is down to Walmart’s focus on low prices plus better customer service, improved ranges, and better-selling environments. The bottom line is that even in an era of stiff competition, Walmart is becoming more and not less relevant to the American consumer,” said Saunders.

    -Neil Saunders

  • Gucci korea reopened its flagship store by going back to basic

    Gucci korea reopened its flagship store by going back to basic

    Italian luxury house Gucci opened the doors to its renewed Korean flagship store in Cheongdam, Southern Seoul, giving fashionistas a new reason to visit the neighborhood.

    The three floors of the shop carry the brand’s most popular items, from bags, wallets and shoes to clothes and the newly launched “Gucci Deco” home-furnishing items.

    Just a few years ago, Gucci was regarded as a luxury brand with a slightly old-fashioned design that failed to appeal to younger trendsetters. But after Alessandro Michele took the helm in 2015 as creative director, Gucci has started a whole new chapter in its history, becoming the most searched for brand on Google in 2017, and adding over 8 million followers on the Gucci official Instagram account.

    Their success was attributed not to trying something entirely fresh, but to Michele’s decision to get back to basics, returning to the vibrant colors and patterns of the old archives, but adding a 21st century twist. His designs were vintage, but not too classic – bold but not gaudy.

    The flagship store carries all the popular items that made Gucci the hottest brand in town, within an interior of walls decorated in old rose, and antique carpets that add a classy ambience to the overall space. The toned-down color of the walls lends a stark contrast to the colorful products on display.

    Visitors to the store can see all of Gucci’s treasures in one space, but there are two distinct reasons why the new shop is worth a look: the do-it-yourself (DIY) zone and the Korean edition goods only available at the flagship store.

    The two DIY zones are located on the second and third floors and are both equipped with different ready-made patchworks and pins that, when guests choose from them, staff members are ready to sew them on in different ways. On the second floor, visitors can decorate their very own jackets, while on the third, one can create DIY handbags and clutches.

    Also available are the Korea-exclusive edition items, which have been embroidered with a Korean tiger that differs from any of the animals usually seen on other Gucci products. The unique Korean tiger is printed on men’s Beastiary bags, wallets and Princetown shoes, which can only be found in this particular shop and nowhere else in the world.

    And while they don’t have their own DIY zone, many of the women’s sneakers have metal buttons on them, which allow the wearer to snap different patches into place and change them as one likes.

    “The Gucci flagship store is like a cabinet of curiosities that’s made to please and inspire visitors,” said a staff member on the day of the opening. “The store is a space where you can experience the unique brand culture of Gucci.”

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  • Ashley Sutton presents Dear Lilly at IFC mall rooftop

    Ashley Sutton presents Dear Lilly at IFC mall rooftop

    Award-winning Australian designer Ashley Sutton has launched a restaurant and bar with a floral theme in a glass-walled space on the roof of IFC mall.

    Dear Lilly is described as a romantic restaurant and bar inspired by the hole-in-the-wall florists found along Parisian boulevards. As with Sutton’s other projects in Hong Kong, such as nightlife venues Iron Fairies, J.Boroski, Ophelia and Yojimbo, Dear Lilly is a collaboration with restaurant group Dining Concepts.

    Floor-to-ceiling shelves in Dear Lilly are crammed with vintage perfume bottles brimming with flowers, and hundreds of bouquets hang from the gently swaying kinetic ceiling.

    “Dear Lilly is unlike anything I’ve ever done before,” Sutton says. “It’s an incredibly enchanting space filled with flowers, love letters and charming antique ornaments I’ve sourced from around the world. I want people to step inside and feel like they’re in a fairytale.”

    Heart-shaped marble inlays in the floor are engraved with extracts from love letters. After reading thousands of love letters from throughout history, Sutton decided to fill Dear Lilly with extracts from letters sent by soldiers to their sweethearts during World Wars I and II. The restaurant’s name even came from one of the letters.

    Love letters and poems scrawled on scrolls of paper are piled on the bar alongside vintage black-and-white photos of couples. The bar and mixologists’ workstations are decorated with typewriters, rolls of ribbon and other knick-knacks.

    For romantic meals, Dear Lilly offers intimate booths designed as supersized versions of vintage jewellery boxes. For the steel heart-shaped structures, the metal has been treated to look like tarnished sterling silver.

    Embroidery and crowns

    Meanwhile, the serving staff at the restaurant wear outfits that feature embroidered button-up shirts or Victorian-inspired dresses and flower crowns. Mixologists wear vintage aprons with magnifying glasses, antique scissors and other knick-knacks poking out their pockets.

    Alongside classic drinks, Dear Lilly’s serves signature items inspired by 1920s French cocktails. To match the decor, the cocktails are garnished with edible flowers and sprigs of lavender. Dear Lilly also offers a range of beers served on its terrace overlooking Victoria Harbour.

    The cuisine is contemporary European featuring Mediterranean favours.

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  • Korean embracing the chill, retail sales number peak in low degrees

    Korean embracing the chill, retail sales number peak in low degrees

    A new study has revealed that Korean shoppers embrace the cold winter climate – but not much beyond minus 5 degrees.

    Supermarket operator E-Mart says the number of customers peaks during winter when the temperature hits minus 5 degrees Celsius, also known as the ‘golden temperature’ in the South Korean retail industry.

    Researchers learned that customers were most likely to come out and shop when the mercury fluctuated around the golden temperature, after analysing the shopping patterns of consumers from last December to early January on Wednesday, Thursdays and Fridays.

    The number of visitors to E-Mart reached the highest levels between December 20 and 22 of  last year, totaling 2.17 million shoppers. During this period, the temperature dropped to around minus 5 degrees Celsius.

    Between January 31 and February 2, 2.12 million people shopped at E-Mart stores across the country, with the temperature plunging to a low of minus 4.3 degrees Celsius on average.

    During the seven weeks when the study was conducted, the temperature stayed at a low of minus 4 to minus 7 degrees Celsius on the top four most visited days.

    The best temperature for retail sales didn’t come often, however.

    The number of customers dropped when the mercury rose to minus 0.3 degrees Celsius, with only 2.05 million people visiting E-Mart stores on Wednesday, Thursday and Friday during the third week of January.

    When it was too cold, retail sales were impacted negatively, with the number of customers plunging below 2 million during some days in January when the temperature dropped to minus 10 degrees Celsius.

    “When cold waves hit and temperatures drop below minus 10 degrees Celsius in the winter, shoppers tend to avoid offline shopping. At the same time, warm weather also doesn’t help retail sales as sales of seasonal products like heating supplies become sluggish. We believe around minus 5 degrees Celsius is best for retail sales,” an E-Mart spokesperson said.

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  • FAO Schwarz Sets Its Sights on China

    FAO Schwarz Sets Its Sights on China

    As it continues its revival, US retail toy giant FAO Schwarz has set its sights on China.

    It plans to open stores in Beijing and Shanghai this year through a collaboration with China toy distributor Kidsland.

    Kidsland will also open 30 FAO Schwarz shops in 200 department stores across China over the next five years.

    “With customers looking for authentic brands and memorable encounters, we believe the brand will become a game changer in China’s toy industry,” says Kidsland International chairman/CEO Lee Ching Yiu.

    Founded in 1862, FAO Schwarz was the oldest toy store in the US when its sole remaining outlet, a flagship on Manhattan’s Fifth Avenue, closed in 2015. But its branded products continued to live on at Toys R Us, which bought the brand in 2009. In October 2016, Toys R Us sold FAO Schwarz to ThreeSixty Group, which designs, makes and distributes toys and other consumer products under a portfolio of owned and licensed brands.

    Meanwhile, FAO Schwarz has signed a licence agreement with Wild and Wolf, which designs and makes wooden toys, puzzles and games.

  • Nature Republic opens store in Indonesia

    Nature Republic opens store in Indonesia

    South Korean cosmetics company Nature Republic opens its first outlet in Indonesia.

    Nature Republic speeds up to expand overseas market. The store is in a Jakarta shopping mall and registered 100 million won (US$94,000) in sales on its pre-opening day,  the Seoul-based company said.

    Indonesia is the fourth largest country in the world and is considered the next big thing after China.

    The economy continues to grow at a rate of 5% and has more potential to growth. As about 90% of the population is Muslim, the world’s largest Muslim country, the company plans to establish a bridgehead for the Middle East and other Muslim markets.

    In order to enter Indonesia, the company has been thoroughly prepared for one year including local market analysis and product pre-registration.

    The company focused on product selection, reasonable price, and all-round marketing strategy, and online marketing considering the characteristics of the country.

    Jakarta shopping mall, chose by Nature Republic to open the store, is main shopping area for Muslim Indians.

    In particular, young people from 10s to 20s who are interested in Korean culture such as K-pop and K-beauty visit the store. The company is targeting young customers to raise brand awareness and stabilize the local market.

    “We will expand our presence in the overseas market, including the Middle East and Europe, in the long-run, with Indonesia as our outpost,” the company said.

    Nature Republic plans to operate up to 10 outlets in Indonesia by the end of this year.

    The company has stores in 17 countries, including China and Vietnam.

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  • Jumbo Group to go jumbo in Asia

    Jumbo Group to go jumbo in Asia

    Following another strong quarter, multi-dining concept company Jumbo Group says it aims to expand its brands to other major Asian cities.

    “We will continue to take a calibrated approach in our expansion plans to capture the growing F&B market in major Chinese cities such as Shanghai and Beijing as well as other regional markets like Vietnam,” says group CEO/executive director Ang Kiam Meng.

    Jumbo also plans to pursue franchising opportunities as well as growing its network through openings, acquisitions, JVs and strategic alliances.

    For its first quarter to the end of December, Jumbo has announced a profit attributable to the owners of the company of $2.6 million, compared to $2.1 million for the corresponding period a year earlier.

    Revenue increased by 5.8 per cent, or $1.8 million, to $32.7 million, mainly because of  increased revenue contributions from the group’s seafood outlets in Shanghai.

    Gross profit increased by 8.1 per cent, or $1.6 million, to $21 million. Gross profit margin was 64.2 per cent, up year on year from 62.9 per cent.

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  • Gap, Banana Republic to exit by end of Feb

    Gap, Banana Republic to exit by end of Feb

    Clothing brands Banana Republic and Gap are about to quit Singapore, FJ Benjamin has announced.

    Both outlets have announced their impending departure on their respective Facebook pages.

    FJ Benjamin, which brought both American brands to Singapore, says it will be closing the final two Banana Republic and three Gap stores in Singapore by the end of this month. The company has decided not to renew the franchise, which expires on February 28.

    When the fashion retailer announced the brands’ arrival in Singapore in 2006, it said it planned to open 30 stores – including outlets in Malaysia – by 2010.

    Gap’s stores are at Suntec City, United Square and VivoCity, while the Banana Republic stores are at Paragon and the Shoppes mall at Marina Bay Sands.

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  • Paul Marciano resigned from Guess

    Paul Marciano resigned from Guess

    Guess co-founder Paul Marciano has stepped away from the business for an indefinite period while an investigation takes place into allegations of improper conduct.

    Marciano denies the allegations which have not been detailed by Guess.

    However Retail Dive has reported that actress and model Kate Upton, who has worked for the brand, accused Marciano of sexual harassment via Twitter and model Miranda Vee, who previously accused Marciano and real estate developer Mohamed Hadid of sexual harassment and assault, had filed a report against the two men with the Los Angeles police.

    “The company takes very seriously any allegations of sexual misconduct, is committed to maintaining a safe work environment, and looks forward to the completion of a thorough investigation of all the facts,” the company said in a brief statement.

    Two independent directors were appointed to oversee the investigation on February 7. The probe is being conducted by the law firm of O’Melveny & Myers and the directors have also retained the law firm Glaser Weil.

    “The board… and Mr Marciano have agreed that Mr Marciano will relinquish his day to day responsibilities at the company, on an unpaid basis, pending the completion of the investigation,” the statement said

    Marciano added: “I have pledged my full cooperation to the company, and I have the utmost confidence in our CEO, Victor Herrero, to continue leading the company during this time.”

  • Arabesque eyes pension funds as it looks to expand in Asia

    Arabesque eyes pension funds as it looks to expand in Asia

    Arabesque Asset Management (Arabesque), a London-based boutique money manager, is looking to expand its presence in Asia, and is setting its sights on pension funds in the region.

    The company, which specialises in environmental, social and governance (ESG) investments, had assets under management (AUM) of US$150 million as at end-2017. Most of its customers are family offices.

    Arabesque Chairman Georg Kell says the company is looking at “securing mandates from Asian pension funds”.

    “As an asset management firm that is very focused on ESG, we are in good position to capture the growth and demand for ESG investment by institutional investors and pension funds,” Mr. Kell said on the sidelines of a recent capital market conference in Kuala Lumpur.

    He declined to disclose which Asian pension funds Arabesque is in discussions with.

    A growing number of pension funds in Asia have begun to take ESG investments more seriously in recent years.

    Japan’s Government Pension Investment Fund, which had AUM of $1.5 trillion at the end of 2017, said last year it plans to allocate 1 trillion yen ($9 billion) or 3% of its equities portfolio into companies that practice ESG.

    In Malaysia, Kumpulan Wang Persaraan, the country’s second largest pension fund, hopes to have 70% of its AUM be ESG-compliant by an undisclosed timeline, up from the current 50%. The fund had AUM of over 137 billion ringgit ($35.22 billion) as at end-September 2017.

    Mr. Kell says Arabesque, which was founded in 2013, needed a few years to build its track record before moving to expand aggressively.

    “In this industry, you are pretty much non-existent until the third or fourth year onwards,” he says.

    According to Mr. Kell, Arabesque will also be looking to grow its retail investor business. This will be done via partnerships with local players because it can be costly to set up a distribution network to reach out to retail investors.

    “In Malaysia, we have a partnership with BIMB Investment Management. We are looking for similar partnerships in the region,” he says.

    But he believes it’s important to educate retail investors about ESG products in order to boost demand.

    “In Asia, their (retail investors) mindset is not open enough… Of course, we know that building something new is never easy. It takes time,” Mr. Kell says. “Nevertheless, I am confident that sustainable investing is here to stay and will become a new normal.”

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  • IKEA to open stores in Philippines, looking for designer

    IKEA to open stores in Philippines, looking for designer

    Swedish furniture-maker IKEA will open stores in the Philippines after it found a local partner, a spokesman for its worldwide franchisor said.

    Inter IKEA Systems B.V. has awarded the franchise right in the Philippines to a company called Ikano, according to its spokesperson, Josefin Thorell.

    Singapore-based IKEA Southeast Asia also posted a job opening on recruitment website LinkedIn for a Manila-based design manager in late January.

    IKEA’s simple but sturdy designs and self-assembly products are now familiar in homes around the globe and the retailer is aiming to generate 50 billion euros ($62 billion) in annual revenues by 2020.

    Reports of its impending arrival has in recent years stirred excitement on social media.

    “We are very happy to confirm that Inter IKEA Systems has taken the decision to open IKEA stores in the Philippines and that the franchise right for the Philippine market has been allocated to Ikano,” Thorell said in an email to ABS CBN News.

    The Manila designer will “work close together with the design team and play a decisive role in planning, executing and planning our first IKEA store in the Philippines,” according to the LinkedIn post, which expires on Feb. 28.

    Ikano Group is engaged in finance, real estate and retail. It’s marketing manager, Jasmin Cruz, said the company had been registered with the Board of Investments for 2 years.

    Ikano Pte Ltd, the Southeast Asian franchisor of IKEA, pre-qualified as a foreign retailer in the Philippines in December 2016, according to a list from the BOI.

  • Cryptocurrency Market Stabilizes at $500 Billion, While Bitcoin Maintains at $11000 Level

    Cryptocurrency Market Stabilizes at $500 Billion, While Bitcoin Maintains at $11000 Level

    The price of the leading digital currency keeps growing in value, positively influencing the entire cryptocurrency market.

    Bitcoin continued to move higher on Monday, after surpassing the $11,000 mark over the weekend for the first time since January. The cryptocurrency reached its highest level since last month at over $11,200 on Sunday, before falling to $10,350 by the end of the day. However, it rebounded on Monday to $11,050, showing a 5% gain.

    Thus, bitcoin has managed to recover from its two-month low of $6,000 recorded earlier this month and is currently trading at $11,186. Other major digital currencies have escalated as well. The world’s second cryptocurrency, Ethereum, is getting closer to the $1,000 level and is now standing at $940. The third cryptocurrency, Ripple, is trading at $1,14.

    The surge had a positive impact on the overall cryptocurrency market, which recorded a valuation of $502 billion on Monday. The last time it broke the $500 billion mark was in mid-December. At the time of writing, the total market cap is worth more than $501 billion.

    Cryptocurrency prices declined at the start of 2018, which according to analysts was due to bans on virtual currencies imposed by different countries. Several major banks, including JP Morgan Chase, Citigroup, and Bank of America, prohibited the use of credit cards for purchasing digital currencies, while South Korea recently banned unknown cryptocurrency trading accounts. Meantime, the US authorities have begun an investigation of the Bitfinex exchange over its links to Tether, which is rumored to being used to artificially inflate bitcoin prices.

    Still, the regulators in South Korea, which is the key market for cryptocurrencies, confirmed last week that they will allow digital currencies to operate in the country, what has been positive news for traders who feared a complete ban. According to HanKyoReh, the demand for the cryptocurrency is surging now, for the first time since the middle of January.

    Besides, analysts predict that bitcoin will continue its upward momentum. Tom Lee, the Wall Street strategist covering bitcoin, said bitcoin will reach $25,000 this year, while Saxo Bank’s analyst Kay Van-Petersen believes the digital currency will cost $100,000.

    According to a new report by S&P Global Ratings, institutional investors should not fear a collapse of the cryptocurrency market, as it is unlikely to disrupt financial markets. Investors, researchers say, would be better protected in case of a huge drop, while retail investors would feel the impact of the collapse the most.

    “We expect rated banks to be largely insulated, given that their direct or indirect exposure to cryptocurrencies appears to remain limited,” said Mohamed Damak, financial institutions sector lead at S&P Global Ratings. “For now, a meaningful drop in cryptocurrencies’ market value would be just a ripple across the financial services industry, still too small to disturb stability or affect the creditworthiness of banks we rate.”

    “We believe that the future success of cryptocurrencies will largely depend on the coordinated approach of global regulators and policymakers to regulate and enhance market participants’ confidence in these instruments,” Damak added.

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  • Blackmores stumbles on China costs and fish oil shortages

    Blackmores stumbles on China costs and fish oil shortages

    Blackmores CEO Richard Henfrey is wrestling with supply constraints for some ingredients and a more competitive market in China.

    Blackmores is grappling with shortages of ingredients such as whey protein and fish oil, and competition in China is becoming more fierce but chief executive Richard Henfrey says the long-term growth projections for the vitamins maker are robust.

    Blackmores shares tumbled more than 15 per cent in early trading on Thursday to $135 as the company said it was working with ingredients suppliers to shorten lead times in its supply chain and that profits from its China business had grown by 4 per cent as it bumped up investment and spent more on expanding its in-country presence in China.

    Mr Henfrey said Blackmores still expects solid growth in the second half of 2017-18, after generating a 20 per cent per cent rise in net profit after tax to $34.2 million.

    He said on Thursday that Blackmores was a more consistent business now after going through extreme volatility in the past couple of years and it would be some time before it was able to repeat the stellar full-year profit of $100 million notched in 2015-16. “That was the gift year,” he said, when booming demand from China fuelled extraordinary profit growth.

    Cost-cutting inside the business and a reduction in discounts to customers enabled Blackmores to generate a 20 per cent rise in bottomline profits, with revenues up 9.3 per cent to $287.4 million. The company lifted its first half dividend by 15 per cent to $1.50 per share, to be paid on March 22.

    But the soft Australian retail market is expected to crimp growth in the second half, while Blackmores is also wrestling with some supply constraints. “We’re working with our suppliers to shorten lead times,” Mr Henfrey said. Whey protein and fish oil were two specific areas where there had been constraints.

    The China market is becoming a tougher market in which to compete, as different players step up their efforts to gain a bigger share of the market as Chinese consumers flock to “clean and green” products from countries like Australia.

    “It’s becoming a more competitive space,” Mr Henfrey said. China sales were up 27 per cent. But Mr Henfrey said profits from China grew 4 per cent as more investment was made in bolstering the in-country presence. Blackmores was also hit by an increase in doubtful debts provisions in China of $2.8 million.

    Blackmores has a new distribution centre at Bungarribee in western Sydney which went into full overdrive in December after a staged ramp-up. “We’ve finished building out the technology in there,” he said. But it was at the start of the supply chain where headaches emerged. “It’s at the other end of the chain,” he said.

    Mr Henfrey, who took over from long-serving chief executive Christine Holgate in August 2017, said sales revenue in Australian and New Zealand slipped marginally to $121 million as more sales which had previously been emanating in Australia from entrepreneurs buying up in local retail stores and then selling them online in China, shifted across to direct sales online in China by Blackmores itself. But EBIT from Australia and New Zealand was up 19 per cent to $26 million.

    Blackmores shares had almost doubled in the past six months from $87 in late August 2017 to $160 on Wednesday before the fall on Thursday.

    This was on renewed optimism returned about Mr Henfrey’s strategy of ensuring a more consistent and reliable Blackmores with a focus on lifting investment returns with tighter management.

    Lofty gains

    Blackmores shares reached the lofty heights of $220 in early January 2016 on the strength of enormous appetite from Chinese buyers for “clean and green” vitamins brands.

    It was largely driven by the Chinese entrepreneurs buying up large volumes of vitamins from Australian supermarkets and big box outlets such as Chemist Warehouse, and then selling them online on e-commerce sites in China.

    But then regulatory uncertainty resulted in a pull-back. Chinese tourists and exporters changed their buying patterns and the Australian market became much more competitive, with high levels of stock left in warehouses, which blunted the speed of replacement orders.

    Rival Swisse was acquired in two tranches for a total of $1.7 billion in 2015 and 2016 by a company now called Health & Happiness, which changed its name from Biostime International.

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