Electrolyte drinks boost: Otsuka Holdings says China’s demand drives Pocari Sweat to new heights
Parent company Otsuka Holdings made the statement in its FY2023 financial presentation.
Otsuka Holdings, which runs both a nutraceuticals and pharmaceuticals businesses, reported a 16.1 per cent increase in total revenue to JPY$2.018 tr (US$13.5bn), Yuko Makino, executive director, CFO said in the company’s financial results released on February 14.
Total business profit jumped 78.7 per cent to JPY$312.6bn yen (US$2.09bn) while profit margin increased to 15.5 per cent from 10.1 per cent.
Pocari Sweat was cited as a key factor driving strong growth in its nutraceutical business, which is divided into functional beverages, functional foods, and nutritional supplements segments.
Last year, strong uptake of Pocari Sweat has driven the company’s functional beverages revenue to JPY$1.49bn (US$9.92m), up 7.9 per cent yoy.
“In functional beverages, sales increased 7.9 per cent year on year, due to Pocari Sweat growth in each country/region through awareness-raising activities tailored to the culture and situation in each area,” said Makino.
Aside from Pocari Sweat, its other functional beverages are Oronamin C, Tiovita, Amino Value, Fibe-mini, OS-1, and Body Mainte.
Between 2018 and 2023, sales of Pocari Sweat also grew at a CAGR of 16.1 per cent, over five times higher than the market growth rate of 3.6 per cent in APAC’s sports drinks market.
Overseas sales of Pocari Sweat have also surpassed that of the domestic market in Japan.
Last year, 53.6 per cent of Pocari Sweat’s sales came from overseas, which made up only 34.7 per cent of sales in 2018.
China was a key driver of Pocari Sweat sales. Companies such as Danone, Genki Forest are also seeing strong demand for electrolyte drinks in China.
“By area, Nature Made in North America and POCARI SWEAT in Asia, mainly China, made significant contributions,” said Makino.
Citing data from Euromonitor, the company said that the biggest markets for sports drinks in APAC, excluding Japan, were China, followed by Indonesia, and Thailand last year.
The strong sales of Pocari Sweat have also boosted the company’s nutraceuticals business and total revenue for last year.
Last year, nutraceuticals revenue was up 10.6 per cent yoy to JPY$483.5bn (US$3.22bn), driven by sales of functional beverages and supplements.
Business profit from this segment was also up 10.1 per cent to JPY$59.7bn (US$398m), with a margin of 12.3 per cent.
“Since the 2nd Mid-Term Plan, we have accelerated our global expansion of POCARI SWEAT and boosted our sales in Asia and other countries. In the 3rd Mid-Term Plan, sales decreased significantly in 2020 due to the pandemic and other factors.
“Since then, restrictions on activities and others have been relaxed, and by taking advantage of the brand strength we have built up so far, we have been able to increase our revenue, particularly overseas.
“As a result, the annual average growth rate of overseas sales has been 16.1 per cent, which is much higher than the 3.6 per cent growth rate in the Asia-Pacific region. As a result, overseas sales which accounted for 34.7 per cent of total sales in 2018, increased to 53.6 per cent, contributing significantly to our business performance,” said Tatsuo Higuchi, president, representative director and CEO.
Nutra business performance
Otsuka Holdings’ nutraceuticals portfolio is divided into three categories – functional beverages, functional foods, and nutritional supplements.
Pocari Sweat, multivitamin brand Nature Made, and nutritious foods brand Nutrition and Santé (N&S) are the three major nutraceutical brands of the company, while plant-based foods brand Daiya, women’s health brand Equelle, and functional drinks brand BodyMainte are the other three up-and-coming brands that the company is investing in.
Nature Made brand was said to have surpassed market growth rate and has become a JPY$100 bn (US$700m) brand.
The brand was growing at a CAGR of eight per cent between 2018 and 2023, higher than the CAGR of 4.3 per cent in the supplement market of APAC, 4.2 per cent of North America, 3.8 per cent of Western Europe, and 4.1 per cent of the global market in the same period.
On the other hand, functional foods sales, consisting of brands such as Calorie Mate, Soyjoy, N&S, and Daiya, were up 3.1 per cent to 973m yen (US$6.49m).
Overall, its nutraceutical business is bigger in the overseas market, where revenue was up 13.9 per cent to JPY$3.19bn (US$21.3m) last year. Back in Japan, nutraceutical revenue was JPY$1.64bn (US$11m), up 4.6 per cent yoy.
“As a result of our global expansion focusing on Pharmaceutical and Nutraceutical businesses, overseas revenue has increased from 47 per cent to 67 per cent of the total revenue and our business overall has been steadily expanding,” said Higuchi.
Next-Gen growth and women’s health
Women’s health is one of the areas which Otsuka Holdings will be focusing on for future growth.
Last November, its subsidiary firm Pharmavite LLC completed its acquisition of Bonafide Health LLC, a company specialising in the creation and sale of supplements and medical devices for women’s health founded in 2017.
Uqora, a urinary tract health brand and EQUELLE, a supplement containing equol are some examples of products by Bonafide Health.
“In addition to our core brand, which has a strong business foundation that we have established, we will continue to make growth investments in new businesses, such as women's health space, as next-generation growth drivers, and to build a new basis for further growth,” said Higuchi.
“In the nutraceutical business, we will address ‘yet-to-be-imagined needs’ of consumers, and as a unique total healthcare company, we will continue to address ‘what only Otsuka can do’ and ‘what we can achieve’ in order to provide society with new value that contributes to people's health,” he added.
