We supply a wide range of infant nutritional and growing-up milk products across both the premium and value segments. Infant nutritionals are used for infants under 12 months of age who are unable to be breastfed while growing-up milk formulas are used to supplement the diet of children older than 12 months. We manufacture and market well established quality brands in sub-Saharan Africa, Australia and Latin America. As a pharmaceutical company that also supplies infant milks, our rigorous safety and quality standards provide additional credibility to our brand offerings.
- Initial signs of rebound evident in Australia with positive growth in volume and value towards the end of the 2017 financial year
- Successful launch of Infacare in Mexico
- South Africa continues to grow in both volume and value
% of total group revenue
|2017 R’billion||2016 (CER)* R’billion||% change|
Nutritionals revenue eased 3% to R3,2 billion in the 2017 financial year. While we saw growth in Latin America and sub-Saharan Africa, a 21% fall in sales in Australasia negatively impacted total revenue growth for the segment. The fall-out in Australia from the withdrawal of informal traders banned from exporting product to China continued to dampen demand and has also caused pricing pressure as operators have cleared consequent surplus inventory. This was a contributing factor to the lower contribution margin percentage achieved. Both Australasia and Latin America showed positive upturns in performance in the second half. In Australia, inventory levels seem to have found equilibrium allowing normal trading volumes to return while an improved performance in Mexico lifted the Latin American business.
We launched our Infacare brand targeting the value segment in Mexico after being awarded a government tender in the previous financial year. We have now won the tender two years in a row which has supported the improved performance in Mexico. Although we have seen some evidence of a growing preference for value brands in Latin America, our premium Comfort brand has yielded positive results. In response to changing market dynamics, our broader strategy is to introduce the Infacare brand across the region, as well as to introduce new pack sizes.
We have consistently grown our share in South Africa with hospitals and healthcare professionals continuing to play a positive role in endorsing the credibility of our brands. Our S-26 offering has maintained a high level of awareness and usage among South African consumers, while Infacare has developed a loyal customer base through an established formulation at affordable prices. We are looking to expand our presence in countries outside South Africa, in order to access new territories on the African continent.
The withdrawal of informal traders who are now banned from exporting product to China impacted both revenue and margins, as operators were forced to offer substantial rebates and discounts in order to clear surplus inventory. We have seen the first signs of a recovery in Australia as volumes started stabilising and then growing in the fourth quarter of the 2017 financial year.
As per the licence agreement signed in 2013 with Nestlé, we have a 10-year period to transfer licensed brands to Aspen-owned brands. The transition to our own brand, Alula, is currently under way across our core territories. In Australia, the manufacture of our first co-branded Alula products commenced in June and launched in October 2017. We simultaneously launched Alula in China through our strategic partnership with a Hong Kong-based distributor. We are in the initial phase of transitioning to the Alula brand in sub-Saharan Africa and Latin America where launch is anticipated in 2019.
We expect that South African consumers will continue to switch to value brands, with Infacare projected to grow per annum in volumes, while premium brand volumes are expected to remain stable.