Blackmores chairman Marcus Blackmore admits he had no idea just how much the opening up of China would turbocharge sales of his company’s vitamins, creams and supplements.
The ASX-listed natural health business has been showered with awards this year while booming sales have seen the stock light up the local sharemarket.
Around 80 per cent of our products are sold through pharmacy in Australia and they give fantastic advice.
Christine Holgate, Blackmores
Shares in Blackmores, of which Mr Blackmore owns 24.5 per cent, have surged from $32 in January to around $189, giving the company a market value in excess of $3 billion.
“It has been an unbelievable year,” Mr Blackmore told Fairfax Media at the unveiling of the company’s first retail store in Australia.
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“It is beyond any expectations. We’ve been in China for four years but we had no concept of what China would deliver.”
At a recent dinner in Shanghai Mr Blackmore met a man from Guangzhou who runs three hospitals treating 20,000 people a day with traditional Chinese medicine.
He said that China’s long history of using traditional medicines means customers in that market are much easier to win over.
“Chinese people have a very clear understanding of the philosophical values of natural health,” he said.
Blackmores floated on the ASX 30 years ago, and for most of that time the company sold 3000 tubs of vitamin E cream a month. In November 2015 the company sold 800,000 tubs of vitamin E cream.
For the three months to September 30, Blackmores reported a 64.7 per cent increase in sales to $162.2 million and a 161.5 per cent increase in profit to $22.6 million.
Mr Blackmore said “things come in threes” and the opening of Blackmore’s first Australian retail store at Bondi Junction Westfield caps off the trifecta.
The other two things brightening the vitamin king’s mood happened last week.
Last Thursday Blackmores boss Christine Holgate was named chief executive of the year by CEO Magazine, and on Friday federal trade minister Andrew Robb awarded Blackmores the health and biotechnology exporter of the year award.
New store boosts connection
Ms Holgate said the Bondi store is not about building a retail presence across Australia but is intended to help connect with Blackmores customers.
“We are not going to become retailers, we partner with pharmacy. Around 80 per cent of our products are sold through pharmacy in Australia and they give fantastic advice,” she said.
“What this allows to do is to bring our products and our therapies much closer to the consumer and enables us to listen to the consumer and better understand their health needs.”
While Ms Holgate is trying to deepen ties with her local customers, the big issue she has is satisfying voracious Asian consumers.
In the past six months Blackmores has increased it production capacity by 60 per cent. The company has hired 100 extra people but has now run out of office space.
In November, which Mr Blackmore believes was “probably a record month”, Blackmores produced 2.7 million bottles of product. It will have capacity to produce 4.2 million bottles a month in April next year.
“The things that keep me awake at night are: availability of raw materials, availability of raw materials, and availability of raw materials,” Ms Holgate said.
In some product lines there is a natural brake on boosting production immediately. For example, evening primrose oil, a market dominated by Blackmores, comes from a plant harvested once a year.
In other cases Blackmores is constrained by its strict quality criteria.
Ms Holgate is loath to put the brand name at risk by compromising even slightly on quality.
“I’m sure I could give you a lot more sales, but not at the quality levels we want,” she said.
Last month Blackmores inked a joint-venture deal with dairy group Bega Cheese to supply infant formula and other nutritional products to Asia, opening a range of new opportunities for both companies.
Ms Holgate said the company actually uses a dairy rival, New Zealand’s Fonterra, as a case study for an internal quality workshop.
Fonterra has been embroiled in a number of dairy food scandals including the 2009 melamine crisis in China and the false botulism alert, which prompted a massive product recall, in 2013.
