Takehome:
- The M&A of several Australian health food enterprises by Chinese enterprises over the last several months will allow Chinese enterprise to leverage the Australian supplement industry’s reputation for quality and safety.
The Health food industry in China has undergone a period of rapid transformation since the Administrative Measures for Registration and Filing of Health Foods took effect from Jul. 1, 2016. These measures stipulate the new requirements for health food registration and filing. China’s domestic health food and supplement industry is plagued by quality and safety issues evidenced by a massive demand for imported health foods manufactured by well-known international brands. In an effort to restore trade equity Chinese are engaging in acquisition, merger, equity participation, etc.
Recently, Australian health food giant Natural Care was acquired by China New Hope Group. We also saw the purchase of Vitaco by Shanghai Pharma and Primavera Capital. One year ago, another well-known Australian health food enterprise Swisse was bought out by China enterprise Biostime.
Australian functional food and nutrient supplements are quite popular among Chinese consumers. Most are traded through CBEC and overseas direct mailing, or sold in China as conventional foods. New health food regulations and CBEC policies (click here to view the report of China CBEC regulatory reforms) mean that in the coming year the technical barriers to trade for these products will be greatly increased with presumably no decrease in demand or growth in this sector. Partnership and M&A will see Chinese enterprise leverage the brand reputation of Australian health food brands and take advantage of the supply vacuum created by the implementation of these new policies.