Exporting Vitamins and Supplements │ The Smart Export Series
EXPORTING VITAMINS AND SUPPLEMENTS FROM AUSTRALIA
WHERE’S THE OPPORTUNITY?
Demand for Australian branded vitamin and supplements have been booming over the past years and one may be wondering if the industry is still worth entering. The short answer is yes – although new entrants will have to find innovative ways of being competitive in a changing landscape. Industry revenue is expected to rise by 2.7% annually over the next five years. Rising export earnings was initially driven by a surge in demand, particularly from China. Daigou sales have heavily influenced the industry’s performance over the past five years. Industry operators initially benefited from strong activity in downstream unofficial daigou channels. However, tightened regulatory controls in China over ecommerce sales and daigou trading have since changed buying patterns, meaning Australian companies must look for new ways to target key markets. The USA and China presents a reliable market while fast developing economies in Southeast Asia such as Thailand with a growing middle class are recognised as lucrative opportunities to capture new market share. Around the world, the COVID-19 pandemic has changed consumer buying behaviours with digital platforms and new products with natural ingredients and boosting immunity likely to gain market traction over the next few years.
OUR EXPERT TIPS
Australian branded vitamin products are very reputable in global markets. It’s well-established farming industry along with high quality ingredient sourcing give it a natural competitive advantage in marketing a clean and healthy image. The COVID-19 pandemic has spurred demand for vitamins designed to boost immunity, including high dose vitamin C and D products. Many consumers have also been seeking out energy boosting supplements and superfoods during lockdown. Innovation is one of the driving forces of competitiveness. Australian brand Vitable for instance has online quizzes which allow consumers to decide what types of vitamins they should be taking. Subscription-based models are hitting off particularly with the trend of young people moving away from ‘quick fix’ solutions to more holistic and long term approaches to managing health. Such models work well with young consumers who value convenience and personalisation.
It is important to note that vitamin products generally have low product differentiation, hence brands in Australia generally compete on price, as well as value added services such as free nutritional consultations. . For example, Swisse’s popular high strengthen cranberry supplements which sell for $29.99 in Australia are approximately 98 RMB (approx. $17 AUD) in China, 610 Thai Baht (approx. $26 AUD). USA prices are much higher $35 USD to ($48.84 AUD). Consumers will likely focus on price and value add in their purchasing decisions. Price competition among operators is likely to force less competitive players out of the industry. It is anticipated that as more players enter the industry over the next five years, there will be an increasing trend of downward prices.
Brands should strive to be more than just a vitamin company. Social media channels such as Instagram provides new opportunities for brands to build relationships with consumers. It is a good idea for companies to position themselves as a holistic wellbeing brand that advocate for positive body and health messages. Running interactive and fun social media campaigns that get consumers involved is another good way of building market awareness. At the same time, when operating in overseas markets it is important to have the right promotion strategy for your target market.For instance, live streamers in China on sites such as Weibo, Little Red Book and Douyin are an invaluable channel for gaining access to wider markets. Brands should consider collaborating with Instagram or YouTube influencers in other European and/or Western markets. Understanding social media in local markets is key for success.
Australian brands should consider establishing distribution facilities in key markets. Having inventory on hand to meet fluctuations in demand is an important determiner of competitive success. It is also importance for new or smaller operators to have a strong online presence to compete with more established players. Those that operate brick and mortar stores must ensure that have proximity to key markets including in large shopping malls or inner-city locations which can drive higher impulse shopping.
OUR STRATEGIC TAKEAWAYS
Brands considering exporting must tread carefully. The vitamin and supplement industry is highly saturated with existing brands well positioned to be price competitive. New market entrants may find themselves needing to cut prices to compete which means profits may be constrained. Nevertheless, for those brands that are strategically innovative in their business model and promotion have strong chances of success. Don’t underestimate the regulatory process in your target markets. Some countries are stricter than others, with variable review time and submission requirements as well as application cost