Promotion and formulation: Blackmores eyes China and Indonesia boost, plus NPD with Kirin’s flagship ingredients

09-Oct-2023 - Last updated on 09-Oct-2023 at 00:56 GMT

Blackmores' new product development will utilise Kirin's flagship immune health ingredient LC-plasma.

Related tags Blackmores Kirin LC-Plasma

Blackmores is set to ramp up advertising to boost brand awareness in China and Indonesia, while also formulating new products with Kirin’s ingredients post the Japanese giants acquisition of the firm.

This comes as Blackmores revealed net profit increased by 37 per cent in FY23, but headwinds in the international markets and soaring raw material costs have pulled down its gross margin.

Blackmores’ CEO Alastair Symington announced the results during parent company Kirin’s Health Science Day held in end September. Kirin completed the acquisition of Blackmores in August for AUD$1.88bn (US$1.24bn).

Between July last year and this year, Blackmores revenue was up 2.3 per cent to AUD$658m (US$416m), underlying net profit after tax climbed 37 per cent to AUD$64.5m (US$40.8m).

Gross margin, however, was down 1.4 percentage points to 51.5 per cent.

This was due to two key reasons, namely headwinds in the international market and raw material cost skyrocketing in the last 12 months, especially that of fish oil.

“The reason for the reduction in gross margin year over year is twofold.

“One was unfavourable country mix as we faced some headwinds in the international markets. Those markets traditionally have very strong gross margin as a comparison to both China and Australia & New Zealand, so where we see growth and international, we always see very good growth in gross margin.”

International markets, in Blackmores’ case, largely refer to its business in South East Asia, which comprises 28 per cent of the company’s net sales in FY23.

Of which, Thailand is its largest market, followed by Indonesia, with the two contributing nine and five per cent to the net sales respectively.

Australia and New Zealand are its core markets, contributing to 44 per cent of the company’s net sales. China is its second-largest market and brought in 28 per cent of the firm’s net sales.

Symington said that Blackmores would invest on advertising and promotion especially in China and Indonesia, where brand awareness was relatively low at 33 per cent and 66 per cent respectively, according to data from market research firm Fiftyfive5’s.

The Blackmores brand is best known in the home market, where brand awareness stands at 84 per cent.

The company expects revenue growth in ANZ to hover at three to five per cent in constant average annual growth rate until year 2027.

“Our expectations there is that Blackmores would grow market share slightly ahead of the VDS market growth,” Symington said.

In South East Asia and China, the revenue growth rate is expected to be between seven and nine per cent.

Ingredient cooperation and further premiumisation under Kirin

Kirin’s flagship health ingredients would be featured in Blackmores’ products post-acquisition.

This includes LC-Plasma, which is already used in Kirin and various Japanese functional foods and supplement brands in Japan for its immune health benefits.

Kirin’s citicoline and human milk oligosaccharides (HMO) ingredients are also expected to be used in Blackmores’ products, said Takeshi Minakata, director of the board and senior executive officer at Kirin.

However, these products will most likely be out in 2025 due to regulatory requirements.

“Blackmores sees the utilisation of materials such as LC-Plasma, Citicoline, and Human Milk Oligosaccharides for the Blackmores brand as an opportunity.

“However, it usually takes several years to launch a product using a new material, due to the complicated procedures for obtaining approval etc which vary from country to country.

“Kirin on its own was expecting to launch in 2026 or later, but by utilizing the knowledge of Blackmores, Kirin is currently aiming to launch in 2025 in multiple countries,” said Takeshi.

As Blackmores’ new product sales is approximately 400 million yen (US$2.69m) per SKU, Takeshi said that Kirin would expect “several billion yen in scale in conjunction with the number of new products in the future.”

Symington, on the other hand, believes that Kirin’s LC-plasma ingredient will enable Blackmores to promote further premiumisation and stronger trust in the brand.

Takeshi added that there were plans in developing the Blackmores brand in Japan.