Retail distribution group AuMake International has added dairy supplements to its portfolio of goods tailored for Chinese consumers, after taking a half stake in manufacturer Herbsmart.
AuMake, which targets Chinese tourists and daigou shoppers through its retail network in Australia, said the acquisition of a 50 per cent interest in Herbsmart would come at zero cost, in recognition of the company’s contribution to the development of the brand.
AuMake has been selling Herbsmart's products since October last year.
Herbsmart’s valerian milk products, which are formulated to aid sleep, have been particularly popular with Chinese tourists and daigou shoppers, AuMake said.
Chairman Keong Chan said AuMake would collaborate with Herbsmart to create a line of milk powder supplement products specifically for the Chinese market, initially focusing on valerian milk suppements.
As part of the transaction announced today, AuMake also holds an option to acquire an additional 40 per cent stake in Herbsmart.
“Our initial joint ownership and opportunity to acquire more of Herbsmart provides a strategic opportunity for us to develop niche products to meet an identified need with the Chinese consumer market, with 241 million Chinese over the age of 60 and that number expected to rise to 487 milion by 2050.
“We have confidence in making trend-creating acquisitions like Herbsmart, given AuMake’s proven ability to build momentum in the popularity of products within the daigou and Chinese tourist markets in Australia, and to identify distribution channels in China that can use that product momentum to ultimately reach the consumer directly in market.”
The Herbsmart deal is the latest in a series of transactions by AuMake, designed to give it a competitive edge in reaching Chinese daigou shoppers.
In May, AuMake acquired the KiwiBuy retail store network, adding five new locations to its retail portfolio.
AuMake also entered a supply agreement in August with one of New Zealand’s biggest dairy groups to create a line of AuMake-branded A1 and A2 milk formula products.
Earlier this month, Aumake signed an exclusive sales agreement with Chinese TV shopping network Anhui Tianton Renhe Culture Communication Co.
AuMake said its products would be initially available through JiaJia Shopping Co, which operates a 24-hour TV shopping channel, with viewership of 385 million people.
At the time the deal was announced, Mr Chan said AuMake had been able to cultivate a strong reputation as a trusted supplier to several large Chinese distributors.
“This recognition comes from AuMake’s ability to promote new brands within the daigou and Chinese tourist markets in Australia, the scale of our operations, and the credibility and transparency that comes from being an ASX-listed company,” Mr Chan said.
“The number of opportunities and significant interest in AuMake from China is extremely exciting for the company.
“In addition, AuMake is able to leverage these opportunities with minimal investment, as marketing costs in China will be borne by our Chinese partners.
“For these partners, they also benefit from not having to expend large amounts of resources and capital in Australia given our existing presence in the local market.”
Mr Chan said he expected the sales agreement with Tiantong and JiaJia, AuMake’s initial foray into the Chinese market, would likely lead to new distribution opportunities and growth potential.