Keytone Dairy makes Chinese inroads via listing agreement with RT-Mart

Keytone Dairy ASX KTD RT-Mart China Sun Art Retail Group
RT-Mart has 484 hypermarket complexes in 233 cities and a 16% market share in China by retail sales value.

Dairy products manufacturer Keytone Dairy Corporation (ASX: KTD) has signed a listing agreement with RT-Mart through the company’s distributor Guangzhou YingLi.

The deal allows Keytone to sell its products through RT-Mart both in its physical stores and online.

The move has been hailed as confirmation of its “four-pillar growth strategy” including expanding its distribution, production capacity, product range in additional stores and increasing powder production capacity through the construction of a new facility.

As part of the agreement, Keytone will supply its proprietary products, including Whole Milk Powder, Skim Milk Powder, Colostrum Milk Powder and Kiwi Fruit Milk Powder, among others.

Keytone notified the market that the agreement does not stipulate specific volumes of production, but rather, sets out the terms on which it will supply its proprietary products as they are ordered by the customer.

Growth in China

RT-Mart is part of the Sun Art Retail Group, a leading hypermarket complex operator in China. Furthermore, Chinese retail giant Alibaba Group owns 36% of Sun Art thereby providing the company with a powerhouse backer to ensure its retail empire continues to thrive.

As of late last year, Sun Art obtained a 16% market share by retail sales value with a national footprint of 484 hypermarket complexes. The stake covers 233 cities across 29 provinces, autonomous regions and municipalities in China, with a total gross floor area of approximately 13 million square meters.

Keytone confirmed that Sun Art has secured another 55 sites to open hypermarket complexes, 37 of which are under construction.

Going phygital

The priorities of the group are to explore and deploy multi-formats and omni-channels and to become a leading “phygital innovator” – the practice of enhancing in-store physical experiences with online digital engagement.

The term was first coined in 2013 and is a fusion of the words “physical” and “digital”, referring to a modern marketing strategy. Phygital aims to provide both a physical brick-and-mortar presence as well as allowing companies to harness the growing presence of e-commerce.

At the end of 2018, Sun Art recorded A$19.3 billion in revenue and A$848.5 million of earnings before interest and taxes (EBIT).

Supplementing this morning’s news, Keytone said that this agreement further validates the acquisition of Omniblend, announced to the market in June.

Following the integration of Omniblend within Keytone, the company will market Omniblend’s proprietary health and wellness products through its China distribution channels with the business rationale of offering its Chinese customers “a much wider range of products than currently available”.

For Keytone’s Omniblend acquisition to be finalised it must obtain shareholder approval, expected to occur at the shareholders meeting scheduled for 26 July 2019.

This morning’s listing agreement helped Keytone shares rise 6.52% to trade at $0.49.

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.