Blackmores, Australia’s leading natural health supplements company, saw profits drop sharply in the first quarter of 2019.
The weak quarter follows the company’s warning in February of weaker sales in China.
China has been a highly lucrative market for Blackmores. The company, along with other Australian health brands, has been a significant beneficiary of the so-called daigiou trade (in which Chinese entrepreneurs and tourists buy products in Australian stores to sell in China at high mark-ups). In 2017 the daigou trade was reported to account for AUS$200 million of its total sales of AUS$717 million.
A clampdown on the daigou trade by the Chinese authorities, including the introduction of new import taxes, came into effect at the end of 2018. The effect of those changes has come quickly and dramatically – profit at the Sydney-based Blackmores fell 43% in the first three months of 2019, contributing to a fall of 14% for the nine months to 31 March.
“The third quarter has been challenging for the company,” said interim chief executive Marcus Blackmore, the founder’s son who owns a quarter of the company and stepped into the role last month following the departure of its last chief executive.
“We firmly believe that this result does not reflect the long-term growth potential of the business. We are committed to a major streamlining of the business, to simplify and improve our processes and structure.”
Photo: Blackmores, via facebook