AuMake International snaps up 50% stake in Health Essence

Daigou market focussed AuMake International (ASX: AU8) has claimed a 50% interest in health supplement brand, Health Essence, with an option to acquire the remaining 50% via a share issue.

Health Essence has been sold in Australian retail outlets since 2012 and includes health supplement products such as fish oil, liver detox, grapeseed oil, squalene and propolis.

According to AuMake, the products are popular with its target market – Chinese consumers. Using the Health Essence brand, AuMake plans to formulate new supplements tailored to this market.

Health Essence’s entire range has been lodged with the Australian Register of Therapeutic Goods and will now only be sold via AuMake retail stores.

With little marketing expenditure, AuMake achieved $191,347 in Health Essence supplement sales for the 2017 financial year at an average gross margin of 39%.

After acquiring Health Essence, AuMake expects gross margins for the supplement sales will be boosted to 50%.

The company has multiple strategies in place to further increase sales and gross margins in the current financial year including lowering production costs, a renewed focus on AuMake and Health Essence brands, growing the number of AuMake retail stores and WeChat group marketing.

AuMake is currently reviewing brand acquisitions across dairy, healthcare, skincare and wool sectors to sell into daigou and Chinese tourist markets.

Including Health Essence, AuMake sells other Australian supplements, food, skincare, cosmetics, dairy products, baby food, infant formula, wool and leather into these markets.

After a false start in August, the company was officially re-admitted to the ASX in early October after raising A$6 million in an over-subscribed capital raising.

Mid this month, AuMake opened its flagship store in Sydney’s central business district and plans to expand its retail footprint across Australian states and territories.

The Chinese daigou market is valued at about A$96.4 billion, with 1,200 daigou stores currently operating in Australia.

According to AuMake, these stores reach about 50 million Chinese consumers a year. Additionally, last year, a record 1.2 million Chinese visited Australia.

Chinese consumers are believed to be wary of China-made products and perceive Australian-made products to be “cleaner” and “greener” and manufactured to safer and higher standards.