'Disappointing' performance: Comvita’s FY24 revenue dragged down by China’s slowing economy

05-Sep-2024 - Last updated on 05-Sep-2024 at 01:56 GMT

China's honey market fell 17.5 per cent, said Comvita, citing data from Tmall, JD, and TikTok. ©Getty Images

Manuka honey maker Comvita says annual revenue for FY24 is down by 12.7 per cent, citing economic slowdown in its largest market, China, as the main reason for the “disappointing” performance.

Comvita also launched “value range” of its products in China on the back of the change in consumption behaviour.

The New Zealand Exchange-listed company announced on August 29 that total revenue for FY24 was down 12.7 per cent to NZD$204.3m (US$127.8m)

Net profit after tax (NPAT) plummeted 142.6 per cent to a loss of NZD$5.6m (US$3.5m).

Greater China reported a 17.6 per cent decline in revenue to NZD$89.8m (US$56.2m). Mainland China, in particular, saw its revenue went down by 23 per cent.

Sales in Australia and New Zealand were similarly down 10.8 per cent to NZD$36.4m (US$22.8m) due to the knock-on impact from China’s slowdown.

In the US, revenue was down 26.6 per cent to NZD$26.1m (US$16.3m). This was due to the loss of distribution in one major customer due to short-term price activity.

In contrast, revenue from the rest of Asia was up 16.6 per cent to NZ$37.1m (US$23.2m). This was contributed by growth coming from the acquisition of HoneyWorld Singapore last July.

General macroeconomic slowdown in China – Comvita’s biggest market contributing 19.2 per cent to its total revenue – was a key reason resulting in the fall.

The broader honey market sales in China also saw a drop of 17.5 per cent, while the manuka honey category was down 15.5 per cent, Comvita said, citing data from Tmall, JD, and TikTok.

Its market share in China also contracted from 60 per cent in 2022 to 54 per cent in FY24.

Discounting activities to clear extra stocks and steep price competition in “entry range” of manuka honey were the other reasons for its drop in revenue.

“I’m extremely disappointed with the results that we report today, particularly after three consecutive years of record performance. Throughout FY24 we faced difficult trading conditions in our key markets along with aggressive price activity from competitors caused by industry overstocks,” said CEO David Banfield.

“We already have action underway to target value consumers whilst continuing our brand premiumisation in key Asian markets.

“Our $10-15M cost out programme is on target and is designed to streamline and simplify the business and ensure agility through different economic cycles. In addition, we have a clear focus on inventory reduction enabling us to reduce net debt to targeted levels,” he added.

Some manuka honey priced as low as US$4

A search on JD.com shows that the price of manuka honey could go as low as RMB$29.99 (US$4.23).

An example is New Image, where its 250g UMF 5+ manuka honey is priced at RMB$29.99 (US$4.23) per bottle. The product claims to be 100 per cent pure New Zealand honey.

Another example is Mizland’s UMF5+ manuka honey, also said to be a product of New Zealand that is priced at RMB$45.28 (US$6.38).

NZ Gold Health’s 250g UMF5+ manuka honey, on the other hand, is priced at RMB$99 (US$13.95).

UMF5+ is the most basic manuka honey. A higher UMF product commands a higher price as there is a higher level of methylglyoxal (MGO) – the compound responsible for manuka honey's strong antibacterial properties.

Comvita’s value range, launched in China in April, was introduced to meet the changing consumption behaviour.

Its Comvita Honey Jelly, for instance, is sold at RMB$48 (US$6.76) for a pack of 10 sticks weighing 18g each.

It also sells Manuka Blend Honey at RMB$149 (USD$20.99) per 250g bottle. This product is said to contain a blend of honey from Manuka and other native New Zealand flowers.

Its UMF5+ honey, on the other hand, is priced at RMB$139.62 (US$19.67) per 250g bottle.

The firm added that it was still conducting pricing tests to optimise volume, value, and market share.

“While we initially appeared to be navigating this fall off the peak, the full impact of the global economic slowdown, aggressive price competition and a significant sales decline in China hit home in H2 FY24. This has been a challenging time for the company.

“This has caused us to take urgent action to right-size the company, and to de-risk, without compromising our long-term potential so we can respond positively as market conditions stabilise,” said chairman Brett Hewlett.

Fortunately, there are early signs showing that business in China is picking up, as manuka sales went up 7.3 per cent yoy in July.

Upcoming plans

Comvita said it would focus on enhanced consumer education emphasising the quality of its products and regional new product development.

It will also focus on premiumisation, as it believes that the premium segment delivers higher loyalty and repeat purchase.

“While market conditions remain difficult, we are continuing to efficiently build our brand, our product offers and our market position to sustain long-term value in a market that remains promising through to 2030 and beyond,” said Hewlett.

The company also believes that new scientific discovery will open the opportunity for making efficacy claims.

It is referring to the discovery of lepteridine, a natural compound unique to manuka honey and is shown to reduce symptoms of functional dyspepsia – a type of digestive condition that manifests in the form of bloating and heartburn etc.