Vitamins giant Blackmores’ dogged determination to lift pet health profits

A vitamins giant is doggedly determined to expand its pet health products market share and has sold a ‘non-core’ Chinese medicines business.

Vitamins giant Blackmores is selling its Chinese herbal medicines business and reiterated its dogged determination to expand its pet health market share.

The company announced on Tuesday it had agreed to divest Global Therapeutics to McPherson’s – known for its Manicare, Lady Jayne and Maseur products – for $27 million.

Blackmores bought the manufacturer for $23 million just four-and-a-half years ago under the leadership of embattled Australia Post chief Christine Holgate, who has stepped aside while investigations continue into giving senior staff almost $20,000 worth of Cartier watches as a bonus.

Blackmores now says Global Therapeutics, best known for its Fusion and Oriental Botanicals brands, is no longer part of the company’s strategic priorities but will have an opportunity to reach its full potential with McPherson’s, which recently established a new health and wellness division.

The plan to sell non-core brands was revealed in February.

Blackmores has been hammered by the COVID-19 pandemic, which dented sales in its core Chinese market.

It has been a volatile year for Blackmores shares, which nudged $95 in February then plunged after the company announced a whopping 47 per cent first-half net profit slump due to higher production costs at a new manufacturing plant at Braeside in Melbourne and a pandemic-related sales hit in China.

After announcing a 66 per cent plummet in full-year net profit in late August, the shares sunk to a low of $60.33 on September 1.

That same month, Australia’s Therapeutic Goods Administration began enforcing new regulations around product claims and labelling requirements, and it cost Blackmores millions to make changes across 14 markets.

Marcus Blackmore, son of Blackmores founder Maurice Blackmore, who stepped down from the board on Friday after 57 years with the company. Picture: John Feder/The Australian.

In a letter to shareholders on Tuesday as the company held its annual general meeting, chief executive Alastair Symington said the business had stabilised, with the Braeside plant integrating and half of $15 million in operating expense savings allocated to its Asian growth markets.

Travel restrictions have meant fewer “daigou” shoppers – people who go overseas to buy products, then resell them back home – but Mr Symington said Blackmores was confident it could double its business in China by 2023 if it could execute its online sales plan.

The company also recently launched a premium line of products in China aimed at pregnant women.

Mr Symington said Blackmores was encouraged by a solid start to the 2020-21 financial year, with strong sales in China ahead of Double 11 – the Singles’ Day online shopping festival on November 11, which is bigger than Black Friday and Cyber Monday combined.

Blackmores is bullish about the pet health market and has major plans to expand its offerings.

But the first thing Mr Symington mentioned when talking about the company’s big opportunities across all markets was the fast-growing pet health category.

In Australia, pet health supplements sales had a projected compound annual growth rate of 9 per cent over the next four years to almost $100 million, while the market in China was expected to double to more than $350 million over the same period, he said.

This financial year, Blackmores aims to increase its share of the pet health market in Australia and expand into Asia – provided COVID-19 doesn’t get in the way, Mr Symington said.

By 2021-22, it wants to have doubled the size of its existing PAW brand.