Nature's Way owner bets on Aussie provenance amidst pending Blackmores sale to Kirin

Nature's Way owner bets on Aussie provenance amidst pending Blackmores sale to Kirin

PharmaCare CEO Glenn Cochran.

PharmaCare Laboratories is no household name in Australia or the other 40-plus countries where it operates, but this company behind such brands as Nature's Way and Bioglan is out to make its local provenance a differentiating factor in the $1.5 billion domestic supplements market where its two largest rivals will soon be in foreign hands.

With competitor Swisse already owned by a Chinese group since 2015, PharmaCare CEO Glenn Cochran says the Blackmores (ASX: BKL) board's endorsement of a $1.9 billion sale to Japan-based Kirin was a "monumental day for the industry".

"Really the three big players in the market are Swisse, Blackmores and ourselves. We pride ourselves on being Australian owned and made where possible," says Cochran, whose Northern Shores company was founded by Toby Browne in 1985 and currently employs around 500 people in Australia along with a further 200 staff overseas.

Home to 27 brands also including Sambucol, Promensil, Rosken, Redwin and Ease-a-Cold, PharmaCare's head office is literally next door to the Blackmores Campus in Warriewood. 

Cochran estimates PharmaCare has 15 per cent of Australia's supplement market, which is slightly ahead of the 14 per cent each held by Blackmores and Swisse.

"Here’s the difference: they are a single brand, meaning that they’re just Swisse or just Blackmores and they play across a multitude of segments," he says.

"Our approach is we're a house of brands, so adding up to that 15 per cent as a company includes Nature’s Way, Bioglan, Naturpathica, Promensil, Fefol, Quality Health Australia – we’ve got a massive portfolio of brands and that’s how we play in the market.

"There's inefficiencies of that; obviously Blackmores and Swisse will get the efficiency through the P&L (profit and loss) of one brand to invest in, but for us it’s a diversified strategy, and considering the size of the market it means we can leverage a multitude of brands that tend to specialise in certain areas."

He says the success of PharmaCare over its 37-year history has been driven by acquisitions, strong sales and marketing organisation, building infrastructure, and innovation.

"That is at the forefront of what we do, constantly looking at trends and ingredient trends around the world and bringing those to market as quickly as possible," Cochran explains.

"We have vertically integrated as an organisation and have a facility in Sydney that manufactures, and I think the more that we have our supply chain closer to the market in which we operate, it definitely gives us a strategic competitive advantage. That’s a big change in thinking from 10 years ago.

"Our philosophy to win at home is our number one priority, and therefore we have got a successful model to take internationally. The competitive pressures between PharmaCare, Blackmores and Swisse is the daily rough and tumble of being in that market, and we’d absolutely love to increase that market share," he says.

In Cochran's view, one of the toughest ways to compete with the Australian-owned card is, quite simply, awareness.

"I don’t think they [consumers] would know that Swisse is now owned by a Chinese organisation, and potentially Blackmores will be owned by a Japanese [organisation]," he says.

"The product's got to be good, high quality at a reasonable price and with strong brand recognition - those are the primary elements to it, but I would think that Australian owned and made is definitely a motivating attribute.

"To have it where you sell it is probably the new mantra."

He notes around 60 of PharmaCare's 200 employees outside Australia are in the UK and Europe, while the group also has a big presence in China as well as a footprint in various other Asian markets such as Malaysia and Singapore, as well as a big market in the Americas in the US and Canada with expansion underway into Central and South America.

Like any fast-moving consumer goods (FMCG) business, dealing with supply chains and rising costs has been an ongoing challenge.

"In some instances, the size of the [cost] increases have just been so great that you literally would be losing money if you didn’t take price, so we’ve really tried to manage that carefully with our consumers to make sure that they're continuing to support us. But we’ve had to in some instances pass that on to manage those cost pressures," he says.

When asked whether PharmaCare too has been in discussions with prospective buyers, Cochrane responds that given the group's PharmaCare's acquisitive nature, approaches have usually been the other way around.

"I'd probably say we get a lot more offers across the desk to look at potential acquisitions," he adds.

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