Food Revolution Group looks to China’s daigou market for sales and product expansion

Food Revolution Group ASX FOD Health More China daigou market sales product expansion
Health More works with more than 160 well-known brands such as Blackmores, A2, Sukin, Lucas Paw Paw, Comvita, Bio Island and Natio.

Food processing company The Food Revolution Group (ASX: FOD) will expand its existing product range and look to harness the commercial opportunity created by China’s growing consumer sales.

Earlier today, the company announced it had signed an agreement with Health More to develop innovative beverage products for them to distribute through their cross-border e-commerce (CBEC) channels into the Chinese market.

The deal means that Health More and The Food Revolution Group will collaborate to bring high-quality Australian products directly to Chinese consumers.

The food processor is based in Australia with a unique operational plan that uses a combination of conventional juice processing equipment and custom-developed equipment and processes. Its ultimate goal is to manufacture a range of high-quality juices, fibres, infused fruits and fruit waters that are sold as branded products or ingredients to customers domestically and overseas.

According to the company, it uses a range of processing technologies, including what’s known as “current counter extraction” (CCE) technology – a method of extraction developed in conjunction with Australia’s CSIRO to extract juice from fruit and vegetables.

In a separate deal, Food Revolution signed a two-year offtake agreement with Natural Fractions last month, for the sale of cold-pressed orange oil produced from juice waste material.

At the time, the company said its orange oil sales to Natural Fractions is expected to generate $1 million revenue per year over the two-year contract.

Meanwhile, today’s announced deal with Health More is intended to further extend its commercial ambitions by targeting China – one of the world’s leading retail consumer markets.

Health More is currently Australia’s largest daigou and e-commerce distributor with its sales and marketing activities establishing the company as a significant supplier of health, wellness and beauty products into China and southeast Asia.

Health More works with more than 160 well-known brands such as Blackmores, A2, Sukin, Lucas Paw Paw, Comvita, Bio Island, Natio and many others in the dietary supplements, milk powders, cosmetics and food markets across the CBEC channel.

Bountiful Chinese market

According to China’s Ministry of Commerce, CBEC in China reached 6.5 trillion yuan (A$1.3 trillion) in 2016, thereby accounting for 20% of China’s foreign trade.

According to market analysts, Chinese consumption patterns continue to set new records with retail shopping becoming increasingly online derived.

Last year, Chinese shoppers spent more than $33 billion in 24 hours during China’s annual “singles day” on 11 November, smashing previous records for the world’s largest retail event and eclipsing Australia’s annual December retail spend.

The event has become a cult-classic favourite amongst Chinese shoppers, especially for Chinese millennials after the tradition reportedly originated in Chinese universities in the 1990s as a celebration of being single.

China’s largest online e-commerce hub, Alibaba generated A$33.6 billion in sales volume during a 24-hour period making Australia the 3rd most popular source of products behind Japan and the US.

“The demand for Australian and New Zealand health and wellness products in China is large and it has enormous revenue potential for Australian companies,” said Bill Nikolovski, executive chairman of The Food Revolution Group.

“The daigou, or overseas personal shopper business, is a very attractive prospect for manufacturers and distributors of health and wellness products. It often sees students, tourists and mothers buying Australian products on behalf of customers in China and is a rapidly growing space,” added Mr Nikolovski.

Today’s news had an instant impact on the company’s share price this morning with shares changing hands at around $0.07 per share, up 25%.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.