McPherson’s – Focus on Core Pillars, Acquisitions & China

Laurie McAllister, MD of McPherson’s Consumer Products talks about the acquisition of startup brands and developing a China-facing business

Re-focusing a business, even a successful one, takes time, energy and commitment. To unlock the full energy of a company, partners, investors, management and employees need to know what its future plans are. Laurie McAllister, Managing Director of McPherson’s Consumer Products has implemented a corporate strategy to re-position solely on three core pillars – Health, Wellness and Beauty – the acquisition of startup brands and developing a China-facing business.

McPherson’s is the number one Australian Beauty supplier in pharmacy and McAllister took on his current role in November 2016. He worked for Coca Cola for 23 years, including senior roles such as the President of Nordics and the Chief Commercial and Marketing Officer for Japan. A former Managing Director of Sanofi ANZ, he also led a significant turnaround of the French multinational pharmaceutical company’s consumer healthcare business, resulting in re-investment in Australian brands and the local market.

Building on Core Brands/Significant Growth/New Team

A major priority is to revitalise our brands, grow our footprint in the $13 billion health, wellness and beauty categories and deliver significant growth in pharmacy and grocery, says McAllister. “We plan to expand the export business model and build on the success of core brands such as A’kin and Dr. LeWinn’s. We have strengthened our financial position by reducing debt and are committed to a strong new product pipeline”. The new strategy has already paid off. By the end of the first half of the 2019 financial year, McPherson’s saw an 11 per cent increase in owned brand sales and a 14 per cent growth in sales across its six core brands, by contrast to the same period in fiscal 2018, says McAllister. “Dr. LeWinn’s sales revenues grew 80 per cent and A’kin sales revenues increased 11 per cent. We also saw a 108 per cent gain in sales revenues from the China market, despite of the fact we couldn’t keep up with supply”.
McAllister has also assembled a new management team. “We are the number one player in five categories with leading brands such as Manicare, Lady Jayne, Swisspers and Multix. We employ 430 people in total and 60 reps. Our focus is not only on our market leading brands, but also finding the right people to bring in, build and service sales and growth. The divestment of home appliances in February 2018 also generated $28 million”.

Extending Market Leadership/Innovative Pipeline

McPherson’s keeps a weather eye on data and trends to retain its pole position. The global organic personal care market is projected to increase to US$25.1 billion by 2025 and the global face mask category will reach US$8.8 billion over the next two years. “China represents 48 per cent of face mask sales and face mask revenues in Australia have doubled in the past two years, says McAllister. “Dr. LeWinn’s continues to be a leading cosmeceutical brand in pharmacy and the face mask category has been a major driver of growth. We launched two new anti-ageing masks last September and they are now in the top 10 anti-ageing masks in pharmacy. We have more in the pipeline and Dr. LeWinn’s Line Smoothing Complex range has grown over 30 per cent in the domestic market, driven by daigou demand”. The iconic Lady Jayne brand has long been the number one hair accessories brand in Australia. “But through our renovation and innovation programs we have extended our market leadership to 31 per cent”, adds McAllister. “Manicare, the number one beauty accessories brand in Australia, is growing strongly both in pharmacy and grocery channels and during the FY19 we added $1.5 million in additional retail sales, further increasing our market leadership. Glam ranks as the number 2 in the beauty accessories category, but during last year’s peak party season, it rose to become the number one lash brand delivering $700,000 in incremental sales”. A’kin is another success story for McPherson’s and is ranked number two in pharmacy in the natural Haircare category with a growth rate of 17 per cent. A’kin’s skincare line-up alone saw sales growth of 30 per cent, by contrast to general category growth of 14 per cent, says McAllister. “Sustainability is top of mind for Swisspers and we launched the first paper stem cotton tip in Australia last year and gained an extra 4.2 per cent share points in the Woolworths cotton tip sector”.

Major Investment in Real Estate/Future in Brand Ownership

McPherson’s has invested over $4 million in retailer shelving and high impact merchandising stands for Manicare, Lady Jayne and Glam to further spur growth and sales for its retail partners. The first phase in accelerating growth in Chemist Warehouse saw the launch of 335 merchandising stands in 130 stores and resulted in sales growth of 16 per cent, says McAllister. “This investment in real estate will continue in the second half and we will also launch flexible mask destination units. Working in partnership with other key retailers, we launched the Manicare Sonic Mini during the Priceline Spring Festival, for example, and gained two share points for the brand. Our strategic customer partnerships are invaluable for continuing success. We have secured 28,000 incremental distribution points in the second half already and increased participation by 65 per cent through new trading terms”. McPherson’s future is firmly on being brand owners, says McAllister. “Our aim is to create a new business through M&A. Startup ventures which are the right fit and which have domestic appeal in Australia and New Zealand and potential for China. To lower the risk, we will seek ownership of 51 per cent in the first instance. Venture partners will have proven IP, trademarks, proprietary category/business practices. As a high-quality ASX listed company with the merchandising skills to propel brand growth, like our multinational counterparts, McPherson’s brings a lot to the table”.

kōtia – A World First Launch/China-Facing Business

McPherson’s is also looking for brands with a clear point-of-difference and the first company to meet its criteria is kōtia. “Based on deer milk from the South Island of New Zealand, the new kōtia range is a world first in skincare, says McAllister. The brand launched in its native Queenstown in mid-February and more than 70 customers, media, China exporters and KOLs were on hand to experience the products. The reception was incredible and kōtia is expected to achieve earned media valued at $2 million. We launched the brand first with Green Cross Health through its Unichem and Life Pharmacy networks in New Zealand, starting with 100 doors and rising to 250. kōtia also rolled out on the top 20 doors of Farmers department store chain in mid-March”. Few other retailers are more experienced than Priceline at giving new brands market traction. “In Australia, kōtia will launch exclusively in the top 350 Priceline doors, including 15 of their leading daigou-facing doors in May”, says McAllister. “In the second half of the year, we will be looking at the leading department store chains and travel retail”. McPherson’s has export aspirations in 11 countries across North and South Asia, the Middle East and the UK, but our main focus is China, says McAllister. “I now visit China about six or seven times a year and the Chinese middle class is expected to grow by more than 850 million by 2030. Over the past three years, we have had consistent growth in the China market from $1 million in FY17 to $11 million in FY 19 and are on track to deliver sales of $20 million over the next two years”. McPherson’s has all bases covered in its approach to growth in China. “We have a strategic partnership with the Aware Group to meet rapid skincare demand in China, for example. We are also across major CBEC platforms, including Tmall, Little Red Book and JD.com. We are fuelling growth for Dr. LeWinn’s with ABM (Access Business Management) to target the daigou market, in addition to working with the domestic pharmacy chains with major daigou businesses, Priceline, Chemist Warehouse and Pharmacy 4 Less. Our aim is to become a true China-facing company”. McPherson’s is already in negotiations to acquire two more venture brands which have unique PODs, say McAllister. Watch this space.

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