The ASX-listed Blackmores will be holding its AGM on next Wednesday (October 27), where the shareholders will elect five directors to the board.
The upcoming election is garnering attention from the industry due to the ongoing disagreement between the largest shareholder Marcus Blackmore and Anne Templeman-Jones, current chair of the company’s Board of Directors, over their directors of choice.
Blackmore has publicly announced his support for George Tambassis – a non-executive director of Australian Pharmaceuticals Industries (API) since June this year.
Tambassis was also the president of the Pharmacy Guild of Australia from November 2011 to March this year.
Based on his LinkedIn profile, he is also the partner of Priceline Pharmacy, Tullamarine Pharmacy, and Vermont South Pharmacy.
However, Blackmore’s support for Tambassis as the non-executive director has been rejected by the current board.
In fact, the board has “unanimously recommended” shareholders to vote against Tambassis’ election in a letter to shareholders on last Thursday (Oct 14).
Instead, Templeman-Jones, who will also be standing for the upcoming election as a non-executive director, said in the letter that the board has “unanimously recommended” shareholders to vote for her and four others.
The four others are Wendy Stops, Sharon Warburton, Stephen Roche, and Erica Mann.
“Following a long period of instability, we believe the now stable, cohesive, experienced and independent Board is critical for Blackmores to realise its growth potential and deliver benefits to all of its shareholders,” Templeman-Jones said in the letter, adding that Blackmore has engaged a PR firm, law firm, proxy solicitation firm to campaign for Tambassis’ election, and “threatening to vote against” her.
In a Linkedin post, Blackmore explained that the current Board was strong on governance but “weak on knowledge of the commercial and philosophical nature” of the business.
Blackmore, who still has personal 19.5 per cent stake in the company and controls a further 3.5 per cent via the Blackmores Foundation, added that there was no health care professional on the Board, and said good governance should not come "at the expense of innovation".
“In my view, governance and self-interest must not prevail over a strong focus on innovation and entrepreneurship which without doubt comes from a thorough understanding of the industry, the business, and its practitioners.
“Pharmacy is 70 per cent of Blackmores’ business. George is one of Australia’s leading pharmacists. He has been stocking and selling Blackmores’ products in his pharmacies for more than 20 years in his capacity as a community pharmacist – he knows what sells, what customers want,” Blackmore said in the post.
In response, Templeman-Jones emphasised that Blackmores’ directors “must have a breadth of skills and experience” to help their multi-faceted, international business grow.
“Blackmores is a company with an ambition to connect one billion people to the healing power of nature by 2025…We believed and continue to believe that to be a director of Blackmores, deep skills in narrow areas are not enough.
“While we recognise Mr Tambassis’ specific expertise as a healthcare professional in the pharmacy sector in Australia, it was concluded that Blackmores already has within its business and on its board health care professional expertise that is accessible to the Board…” she said, adding that Tambassis was interviewed twice by the Board but was unsuccessful when compared to other candidates.
Blackmore, who used to be former executive chairman, had retired last October, while Templeman-Jones commenced as the Board’s chair the day after last year’s AGM.
Who’s standing for election?
Industry experts speak
Against the backdrop, industry experts whom NutraIngredients-Asia has spoken with on the condition of anonymity, have expressed their support for Blackmore’s choice of director.
I think it is vitally important to have [someone with] some knowledge of the industry, because the previous board members that I have seen or heard of are from completely different industries and have no basic background or understanding of the supply chain, or the advertising market, or the promotion of complementary medicines.
This is the sad part for Blackmores’ Board to be lacking someone with basic industry experience. I am all for George coming to the Board, there needs to be a material change in Blackmores’ Board
- A senior leading supplier of raw materials to the complementary medicine industry for over 30 years
Citing the examples of Blackmores’ new launches in Australia in the past one year, one supplier sided with Marcus Blackmore over his innovation concerns.
“It is renovation, it is not innovation, they are renovating products, relaunching products with a slightly different name and a slightly different formula,” he said.
Blackmores launched seven new products in Australia and New Zealand in its last financial year.
They included Sleep Sound Magnesium, Run Down Rescue under the Blackmores brand, D3 Drops Forte and D3 Vegan Spray under the BioCeuticals brand, Digesticare SB under the pet nutrition brand PAW.
According to the website of BioCeuticals, they have also launched ArmaForce Daily Protect and MultiFactors for Juniors recently.
“They are not showing industry leadership, they are not creating new categories, they are not investing in new categories.
“I have offered them new ingredients that are clinically studied and on trend, and they just took too long to get to market.
“We have been talking to them for many years in certain categories for certain ingredients and they can’t make a decision,” he said, revealing that there were discussions with the company on NPD for joint, bone health, osteoporosis, pain, and immunity.
“From what I have gathered, the NPD people can’t get it through the internal system. The internal process is strangling the business. They had restructured but they still haven’t fixed it…No one is prepared to take any risk.
“They are waiting for the fast-moving nimble brands to launch [new innovative products] and sometime later, Blackmores come to the market, or they realised that they could have launched that product, but they can’t get an exclusive on it because that product is already out in the market.
“I think it’s a nightmare for the business, because they are going backwards when the rest of the market is moving forward and being innovative,” he said.
He added that this was in stark contrast to Marcus Blackmore’s leadership.
“When Marcus Blackmore was in the business, [when] he had a gut feeling for something and when he said we are going to launch this and when they launched it, they were pretty successful with it.”
He cited Macu-Vision, Executive B (B-complex), and Omega Triple Super Strength Fish Oil as some of the launches which have left a good impression on him.
“To be fair, a lot of them [other complementary medicines companies] have the same problem, they struggle with fast innovation. But some have managed to make decisions and get on with it,” he said.
In a similar vein, Australian Journal of Pharmacy reported nearly three weeks ago that Chemist Warehouse director Mario Tascone said that Blackmores “has really lost its way”. Chemist Warehouse is Blackmores’ key pharmacy retail partner in Australia.
“There’s no innovation there, nothing happening there, no one with a real sense of the retail world, in particular retail pharmacy, and there’s no surprise to me there’s competitors popping up left right and centre to take the mantle off Blackmores and its strength and market share in pharmacy,” Tascone was quoted in the article. He also expressed support for Tambassis to be elected to Blackmores' board.
Last year, Blackmores launched 16 new products in China, including Multi-Action Joint Ease, Infant D3 Drops, Women’s Bone Care Calcium & D3, and High Strength Celery 7000.
In its international markets, 40 new products were pushed out, including Power Up and Bio C Acerola Plus 1500mg.
CEO Alastair Symington, who previously worked at Nestle and Coty, has also earmarked pet nutrition as one of the growth pillars, citing the billion-dollar pet vitamin and supplement markets in Australia and China as opportunities.
Not easy for change?
Another industry expert with over 15 years of experience echoed the view that the board should include a complementary medicine professional, but also acknowledged that it was not easy to push through NPD in big corporations.
“I think, today Blackmores has very few, if any, people who have grown up in the natural medicines industry or in the healthcare industry. There is no one in the senior leadership team or on the Board of Directors who has grown up in the natural products industry.
“Natural products are not the same as toothpaste, fried chicken, skincare. They are also different from pharmaceuticals in many ways, and so I think it is critical [to have someone with complementary medicines industry experience on the board],” he said.
He was also of the view that there has been a lack of product innovation.
I think the context that Marcus is using is whether there’s any wow factor, new to market or new to industry ingredients or formulations or dose formats that they are using, and I think for most cases, the answer is no.
The interesting thing about Blackmores is they have innovative ingredient suppliers around the world knocking on their door, so it is not like they are not aware of the some of the stuff that’s happening.
- An industry expert with over 15 years of experience in the complementary medicines industry
Keeping in mind Blackmores’ range of portfolio, he acknowledged that change might not be easy in a large organisation such as theirs.
“In their case, it could be therapeutic goods across 20 or 30 different categories, so one should not underestimate the complexity of the task that they face in terms of fixing their innovation problems.
“I don’t want to belittle their attempts at fixing it…It is very hard to innovate inside a big business, there are so many stakeholders, decision makers, layers of approvals etc.
“[But then again], this depends on how you structure it [the business] internally, there are some bigger companies which managed it in a way that they are able to move faster. It is not easy as it sounds.
“So that comes down to having more industry people inside the business. If you intuitively know how natural medicines work, you can at least move faster.”
Financial performance
Last year, Australia’s complementary medicine industry recorded a yoy growth of 1.5 per cent, valued at AUD$5.69bn (US$4.2bn), according to trade body CMA.
Blackmores, however, reported that its revenue in Australia was down 14 per cent to AUD$280.6m (US$203m) in FY2021.
It said that this was due to 1) fewer sales to travellers and international students in retail outlets, 2) a mild cold and flu season which impacted the sales of BioCeuticals, and 3) a shift in consumer purchase from pharmacies to grocery stores due to the lockdowns, where the average spend per trip was lower.
Overall, its FY2021 profit was up 61 per cent yoy to AUD$25.4m (US$18.4m), with South East Asia and China driving growth. In China, revenue climbed 27.8 per cent, mostly led by the cross-border e-commerce (CBEC) channel.
In the year before, their sales in Australia and New Zealand was also on a slowing trajectory, declining 14.8 per cent to AUD$227m (US$162m).
Today, Australia is still the firm’s largest market and it has been expanding its overseas markets actively.
“There is only 25 million people here in Australia, they have got better market opportunities in Indonesia and other Asian markets. But you have to be strong in your domestic market to show leadership for other markets,” said the senior leading raw material supplier.
Last October, the company also announced its sale of its TCM and oriental botanical supplement arm Global Therapeutics, with CEO Symington describing it as “not a good fit.”
Slow market expansion?
Blackmores announced its launch into India during end-September, but Marcus Blackmore had criticised that this could have happened two years ago, claiming the move was bogged down in consumer research despite completing extensive studies of the Indian market.
The company is now retailing four SKUs on e-commerce sites such as Amazon India, and are catering to bone and joint health, immunity, and eye health.
Changes in top management
There has been a number of changes in the top management at Blackmores in recent years.
The following is a list of top executives who have left:
- Ayumi Uyeda, MD, Australia and New Zealand, Feb 2020 – Jul 2021
- Aaron Canning, CFO, Dec 2014 – Mar 2020
- Richard Henfrey, CEO, Aug 2017 – Aug 2019
- Christine Holgate, CEO, 2008 – Sep 2017