Asian consumers determined to improve their lifestyle are boosting the fortunes of Australian producers of premium baby milk formula, vitamins and honey, as the regionâ€™s burgeoning middle class jumps on the health food bandwagon.
With their expanding wallets, middle class consumers are fuelling a sharp increase in sales of high-quality products from Down Under, sending the profits and share prices of health foods companies â€” particularly producers of infant milk formula â€” into unprecedented territory.
They are led by Chinese consumers fearful of lax food safety standards at home, where cost-cutting by producers have resulted in deaths and health scares. â€œYouâ€™ve had almost three decades of incredible GDP growth (in China) and that has brought a huge amount of spending power to the Chinese consumer,â€ IG Marketsâ€™ analyst Angus Nicholson said.
â€œAnd given the fact that there has been some questions around â€” particularly food, health and medical products â€” in China, there has been an increase in demand for foreign, top quality brands.â€ The growth is being described as a shift from â€œmining to diningâ€ as Australia transitions away from supplying China with key metals such as iron ore and coal towards feeding Asiaâ€™s consumption boom.
While much of 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 from the increased appetite. Supplements maker Blackmores last year had the Australian stock marketâ€™s highest share price, jumping 534.03 percent to Aus$217.98.
Its net profit for the six months to end-December soared 160 percent compared to the previous period, driven by sales to Chinese consumers, which made up 40 percent of revenue. Bellamyâ€™s Australia, whose organic baby milk powder is nicknamed â€œwhite goldâ€, saw its share price leap more than 700 percent last year as its net profit spiked by 325 percent in the second half. Rival formula producer a2 Milk Company is also enjoying strong demand.
A firm tapping into the growing Asian craze for honey is Australiaâ€™s largest producer Capilano, which recorded a 52.9 percent surge in 2015 second half net profit. Brands like Bellamyâ€™s and a2 are seen as trustworthy by the Chinese as they are sold in Australiaâ€™s dominant supermarket chains Coles and Woolworths, Benjamin Sun of digital marketing consultancy ThinkChina said.
â€œWhat they are thinking is if the milk powder is being drunk by Australian babies, it should safe for Chinese babies,â€ Sun said.
But the baby powdersâ€™ popularity has overwhelmed the two supermarket giants, which have imposed two or four-tin limits for each purchase. Even souvenir shops that usually stock stuffed toys and sheep skins now make room for formula, propolis and royal jelly supplements â€” honey products believed to boost health â€” as well as manuka honey.