Australian vitamin-maker to build Shanghai R&D center

After six years in the Chinese market and strong recent performance, Australian health supplements maker Blackmores Ltd is building its first overseas research and development center in Shanghai, with an investment of millions of Australian dollars.

The center, part of the company's Blackmores Institute, is expected to open within the next 12 months and will be developing products exclusively for the Chinese market, the Sydney-headquartered company said.

"The Chinese market is our biggest and most important international market, which is approaching 40 percent of our total scale," said Stephen Chapman, the company's chairman, while visiting Shanghai for its global board meeting last week.

"Our institute in Australia is really our core body through which we focus our education and research. We think now is the time to make our first step outside Australia. Given our success here, it's a logical step to have our first international institute in Shanghai," he said.

The company's latest financial report showed that its sales in China in the first nine months of fiscal year 2018 were up 21 percent, hitting $102 million.

Richard Henfrey, Blackmores' CEO, noted that 90 percent of its sales in China originate from e-commerce channels.

"It's been a very exciting three to four years for us," Henfrey said.

Blackmores entered China in 2012 as a brick-and-mortar business, with a dozen products offered in over 3,000 Watsons outlets across the country. Blackmores witnessed robust double-digit growth in late 2014, when cross-border e-commerce saw incredible uptake in the country.

"The growth we are experiencing in China is basically still driven by the penetration of new households. I don't think the (growth) engine is so much about certain cities or demographic groups, but the overall increased awareness and access to the brands that meet their demands," Henfrey said.

He gave the example of the brand's vitamin E cream, which posts flat sales of 3,000 to 5,000 units per month in Australia. But after sales promotion in China, its sales soared from 400,000 per month in China to 800,000, and then a million a month in less than three months in 2015.

"The market is definitely yet to hit its peak, and we will still see many years of growth," Henfrey said.

"Our success in China at the moment has been very much built on Chinese consumers' desire for imported products," he added.