Speaking to us in an exclusive interview in Shanghai, Henfrey said ‘new retail’ – a termed coined by Alibaba’s Jack Ma – was an exciting development for China’s retail market.
“For Alibaba to be bringing their consumer knowledge into a bricks-and-mortar retail environment is really interesting. It will have implications for our industry as much as any other,” he said.
Henfrey and the board visited one of Alibaba’s bricks-and-mortar Hema store, where consumers can have their groceries delivered in less than 30 minutes, scan barcodes to reveal a wealth of information on traceability and nutrition, have fresh seafood cooked in store while they continue to shop, and use their phones to select and pay for items.
“The shopping gets home before you do,” said Henfrey.
It is understandable that anything that brings together e-commerce and bricks-and-mortar sales would pique the interest of Blackmores.
So far, around 90% of its China business comes through cross border e-commerce sales, with the remaining coming through domestic sales on a small number of products that have secured the required ‘blue hat’ registration.
“We are very keen to continue to grow our e-commerce business,” added Henfrey, “but we also want to build the bricks-and-mortar-retail we have here, which is currently around 10%.”
“That’s why we’ve had our board over here for the week to look at how we can best achieve this.
“I’m really interested in the ‘new retail’ trends and we are also exploring the bonded warehouse model, where the customer can actually go and buy, and leave, with their purchases.”
China’s existing e-commerce regulations, where sales are essentially classed as personal purchases, are due to expire at the end of this year, and officials have not yet signaled if they will be reknewed.
“The thing about China is that it just changes so quickly, and overseas companies need to be ready to adapt to that and make shifts accordingly,” added Henfrey.
“So we are doing a lot of work to build the presence in both e-commerce and bricks-and-mortar.
“Longer term, , I think the whole idea of the government’s Healthy China 2030 policy, offers a huge opportunity for us and other high quality health brands to build a really strong preventive health agenda for the country.”
Acquisition update
In terms of new products for the China market, Blackmores’s recently launched its latest probiotics range, with its kids’ versions following just a couple of weeks ago.
Henfrey said they had been impressed with the sales so far and said he could well understand recent figures released by the International Probiotics Association that showed almost half of all of Asia’s probiotics purchases were made in China.
Closer to home, he said work was progressing well following the company’s $43m acquisition of contact manufacturer Catalent, which was first revealed in April.
Although Blackmores won’t officially take hold of keys until October 2019, he said the processes of moving the site towards only producing Blackmores products was gathering pace.
This will the first production site fully owned by Blackmores, but Henfrey said he had not received a a negative response from its existing contact manufacturers.
“Firstly, the market in Australia is quite hot,” he added. “So there is lots of demand. Also, the site will account for around 50% of our production, and it already does 15%. So, with the market continuing to grow, for us and others, I’m not sure they will see too much difference.”
He added it was important for Blackmores, especially in China, to be able to show that the brand was responsible for manufacturing its products to a high standard in Australia.