News

Australian infant formula Company, Bubs Australia, has reported a group gross revenue of $20 million for the fourth quarter, marking a 27 per cent increase compared to the previous quarter and continuing the sales growth momentum.

Gross revenue for branded products – excluding B2B and bulk powder sales – amounted to $19.9 million, down 59 per cent on the previous corresponding period (PCP) but up 27 per cent in the third quarter. Its infant milk formula (IMF) also showed promising growth, with group gross revenue up 49 per cent in the third quarter.

Despite being down 59 per cent on the previous corresponding period (PCP), the company remains optimistic about its performance.

In Australia, Bubs fourth-quarter gross revenue of $51.1 million was up 7 per cent year on year and down 3 per cent on the third quarter. The company said with continued shared market growth and additional stockists – including Baby Bunting and Big W – it finished the year strongly with full-year net revenue up 19 per cent and finishing above the guidance range at $15.2 million.

The company’s expansion in the US showed strong results, with gross revenue of $11.8 million for the fourth quarter, up 45 per cent on year and 97 per cent on the third quarter.

Bubs achieved its first $1 million month on the e-commerce platform Amazon in May and continued to see sales growth in June. The company said it remains on track to meet all regulatory requirements for permanent access to the US market. 

Meanwhile, its China business faced challenges due to a dispute with entities affiliated with AZ Global, resulting in excess stock in trade and subdued sales. Fourth quarter gross revenue in the country plummeted 96 per cent on PCP and 55 per cent against the third quarter. 

However, Bubs says it remains hopeful as it sees modest growth and sell-through in cross-border e-commerce for Caprilac, with its sales volume stabilised.

The company has also outlined a multi-channel growth strategy with new leadership and trade partners in China.

Australian tanning and skincare brand Bondi Sands will be acquired by Kao Corporation, a $26 billion Tokyo-listed chemicals and cosmetics giant.

Bondi Sands, the country’s most recognisable self-tanning brand, was founded in Melbourne in 2012 and is now sold in more than 32 countries, including the US and the UK.

Kao Corporation subsidiaries Kao Australia and Kao USA are set to own the Australian brand in a cash deal estimated to be worth $450 million, according to The Australian Financial Review.

Bondi Sands co-founder and chief executive Shaun Wilson said his brand shared values and principles with the Japanese company, which would help it grow globally.

“The integration of Kao’s renowned scientific and technological resources into our operations is an unparalleled opportunity that will significantly contribute to the exponential growth of our brand, empowering us to further expand our product offerings and advance our research and development initiatives,” Wilson said in a statement issued by Kao.

“With this partnership, we can now confidently explore untapped markets, reach more customers around the world and continue to fulfil our company mission.”

Kao’s interest in Bondi Sands lies in the brand’s extensive range of broad spectrum sunscreens, most of which are SPF 50+.

The Japanese giant said it had nominated skincare as a medium-term growth driver and was seeking “aggressive investments” to grow through skin protection and sun-care products. Bondi Sands will give the Tokyo-based giant solid footing in the self-tanning market.

Karen Frank, president of Kao’s consumer care business in the Americas, Europe, Middle East and Africa, said Bondi Sands would be a perfect fit for its portfolio, which includes John Freida, Biore, Jergens, Curel and more.

“Quality, innovation, environmental responsibility, accessibility and community are at the forefront of everything it does, ideally aligning Bondi Sands to our own brand values and corporate philosophy,” Frank said.

“The addition of Bondi Sands to our consumer family of brands will greatly advance our mission to be the pre-eminent leader in the global skin protection business and continue our journey of offering diverse products that promote a ‘kirei’ [clean and beautiful] lifestyle that is healthy, inclusive and sustainable for all.”

Bondi Sands and Shaun Wilson have been contacted for comment.

The deal is subject to “normal regulatory review and approval” according to Kao’s statement.

Last year, Bondi Sands faced a US class action for alleged greenwashing over its claims that its sunscreens were “reef friendly”. The self-tanning brand’s first batch of products turned customers green and had to be recalled.

“It was not the greatest start,” Wilson said in January 2020. “The quality control of one of the ingredients was not up to scratch and we had to do a recall. We faced up to it and were honest with our wholesaler Priceline and they gave us another chance.”

Bondi Sands is the latest in a string of Australian brands that have been sold to international conglomerates.

Craft gin distillery Four Pillars was sold to Japanese-owned beverages giant Lion in early July, while Melbourne-born luxury cosmetics brand Aesop was snapped up in April by Brazilian owner Natura & Co Holding for $US2.53 billion ($3.7 billion) in the biggest deal for a luxury brand in Australian history.

Japanese giant Suntory will merge its two drinks businesses in Australasia to create a $3 billion-a-year company that will see alcohol brands including Jim Beam and the No.2 ready-to-drink spirits brand -196 brought under the same roof as non-alcohol products.

The non-alcohol brands include Australia’s biggest selling energy drink, V Energy, which is outpacing fierce rival Red Bull. It also sells Maximus and Boss Coffee.

The new Suntory Oceania entity will be up and running by mid-2025, and means Coca-Cola Europacific Partners will hand back a contract after 16 years of Coca-Cola entities operating the local manufacturing, sales and distribution of the Suntory Beam alcohol brands.

Coca-Cola Amatil, the former ASX-listed Coca-Cola bottler in Australia which previously held the rights since 2009, was swallowed by Coca-Cola Europacific Partners in a $9.8 billion buyout in 2021.

Darren Fullerton, chief executive of Frucor Suntory, said the non-alcohol business had generated sales growth of 10 per cent-plus in calendar 2022 and sales continued to be solid. The alcohol brands had also been generating good growth of high single digits. “Both of these businesses are in significant growth,” he said.

Suntory has started building a $400 million manufacturing and distribution facility at Ipswich in Queensland on a 17ha site which will have an initial production capacity of 20 million cases of ready-to-drink products annually. It will give extra impetus to Suntory’s growth plans. There is also a production site in Auckland.

“It’s been a bit of a sleeping giant in this part of the world,” Mr Fullerton said.

Suntory had been weighing up its strategic options and had decided that to take full control of both businesses and merge them into one was the best way to accelerate growth.

“The timing, for a number of reasons, was right,” he said.

‘Hourglass effect’

The two businesses currently operate separately and have a combined workforce of 1100.

Beam Suntory brands include Jim Beam, Maker’s Mark, Canadian Club whisky and Hibiki Japanese Whisky, but one of the biggest profit drivers is the ready-to-drink brands known as -196, a low-sugar product which is hugely popular in Japan.

It first arrived in the Australian market in 2021 and has risen to be the No.2 light RTD in Australia. The name comes from the extremely low temperature at which lemons are frozen before being crushed into a powder used in the drink.

The Frucor Suntory business’ flagship product is V Energy, in a distinctive slim green can. It is the No.1 energy drink in Australia, having overtaken Red Bull.

Mark Hill, managing director of Beam Suntory, said Coca-Cola entities had done a good job in overseeing the alcohol brands, but it was time for Suntory to take control and step up the growth.

“It was the end of the agreement. It’s nothing against them,” Mr Hill said. Coca-Cola Amatil had signed in 2015 a new 10-year agreement to make, sell and distribute the alcohol brands in Australasia for the following decade.

He said there had been some softness in parts of the alcohol market in the past few weeks as cost-of-living pressures increased in households.

“We’re only starting to see that in the past couple of months,” he said. “In some areas, there is a bit of an hourglass effect.”

He explained that the high-end premium segment was still strong, with affluent drinkers still spending up, and that the bottom end of value buyers was still solid. But cutbacks in discretionary spending by middle Australia had caused softening in the mid-market.

Across the two businesses of alcohol and non-alcohol brands, the combined retail value of annual sales is around $3 billion for sales in liquor chains, supermarkets, convenience stores and hotels and bars.

The alcohol brands generate solid sales in liquor chains such as Dan Murphy’s and BWS owned by Endeavour Group, and the liquor chains run by Coles Group.

Beverage companies Beam Suntory and Frucor Suntory have announced a $3 billion multi-beverage partnership in Australia and New Zealand for premium spirits and non-alcohol segments.

The combined company will become the fourth-largest ANZ beverage group in Oceania taking over “full end-to-end control” of its portfolio in manufacturing, sales, and distribution.

The deal follows an announcement yesterday by Coca-Cola Europacific Partners (CCEP) and Beam Suntory that they would end their 16-year partnership in Australia and New Zealand, effective upon the expiry of the contracts on June 30 and December 31, 2025, respectively.

Despite the ownership overlap, the two companies are not merging, but partnering up.

Frucor Suntory CEO, Darren Fullerton, said the new venture is about “bringing the best” of Suntory to Oceania.

“With the ability to accelerate our growth trajectory, we strongly believe it will redefine market dynamics and offer more consumer beverage moments from sunrise to sunset, unlocking innovation for our customers across retail and hospitality industries.”

Mark Hill, MD of Beam Suntory Oceania, said the collaboration demonstrates the company’s belief in the growth potential of the Australian and New Zealand markets.

The business has also made a $400 million investment in the construction of a new net zero facility in Ipswich, Queensland which will complement its current manufacturing operations in Auckland.

The new Queensland site will become home to additional beverage processing, packaging, warehousing and distribution operations and will be able to produce 20 million cases initially.

It is expected to be operational by the middle of next year and will assist in manufacturing more than 50 million cases in the future.

Although preparation is currently underway, the partnership will only become effective from mid-2025 in Australia and 2026 in New Zealand.

Health and wellness brand PharmaCare has purchased Bounce from administrators, expanding its natural health foods range.

Bounce is known for its protein balls and other health snacks, however, the company recently collapsed under heavy debt.

The company said Bounce’s acquisition strategically complements its focus on building a portfolio of brands that positively impact people’s lives with “high-quality and delicious” products that are easily accessible.

Glenn Cochran, CEO, PharmaCare, said adding Bounce to the company’s portfolio underscores PharmaCare’s commitment to growth through local acquisitions.

“We have a strong team of experts in the natural health sector who are already putting their collective minds behind the brand’s success to support Bounce customers to achieve a seamless ownership transition,” said Cochran.

Bounce joins PharmaCare’s health foods division together with its Go Natural brand. 

According to the company, its first priority would be driving continuity with Bounce’s existing customer network to support consumer demand. This involves reviewing the product range and focusing on the 11 core products, such as Protein Balls. 

“Our team is excited to continue supplying the beloved Bounce balls and more to Australians across the country who enjoy healthy snacking on the go,” Cochran concluded. 

Bounce is PharmaCare’s 28th brand, joining Nature’s Way, Sambucol, Bioglan, SUP Supplements and others.  

Australian shoppers are predicted to spend $860 million on Father’s Day gifts this year, according to research by the Australian Retailers Association (ARA) in collaboration with Roy Morgan.

However, although 35 per cent of consumers said they plan to buy a gift, the research projects a “modest dip” in spending this year, down $12 million or by 1.3 per cent.

ARA CEO Paul Zahra said spending forecasts are “marginally down” given the current economic environment.

“Retailers will still be encouraged by the $860 million projected spend, which will provide a reprieve for some retailers from the intense pressure due to rising operating costs and an overall discretionary spending slowdown.”

About 18 per cent of respondents said they expect to spend on food and alcohol gifts while 10 per cent said they will spend on clothing, shoes and books and 6 per cent on music and games.

Zahra described the occasion as a “social family event” with consumers favouring food and alcohol as gifts.

“Father’s Day is another gift-giving event centred around giving back – and we find that when shoppers are showing appreciation for loved ones, they are more likely to splash out.”

ResMed’s decision a year ago to stockpile components to beat a pandemic-fuelled supply chain crunch allowed the company to keep up with demand for its sleep apnea machines but it has come at a cost.

Chief executive Mick Farrell says the company’s profitability is not where many analysts expect – even 12 months later.

“In the heat of the supply chain crisis, I just couldn’t get availability of semiconductors from the traditional suppliers and we were redesigning our products. We did all that,” Mr Farrell said.

“But then we bought components at a tough time and supply was tough, so we paid quite high prices. Freight rates 12 months ago were high, so all that inventory is now working its way through to our sold products … and when we sell them, we take the cost of what we purchased at.

“Twelve months ago, everyone said that was fantastic – freight rates are high, doesn’t matter, just take care of the patients. Now, they’re saying ‘but wait a second why isn’t profitability not where I want?” Well that’s why.”

ResMed’s revenue soared 23 per cent to $US1.1bn ($1.68bn) in the three months to June 30 as pandemic-induced challenges slipped further into the rear view mirror. But the result was slightly below analysts’ expectations.

The price of the company’s ASX-listed chess depositary interests fell 9.4 per cent to $30.67 on Friday, against a 0.2 per cent rise across the broader sharemarket.

Mr Farrell said “unconstrained availability of our market leading cloud connected flow generated platforms” had allowed the company to meet demand in its key global markets, with the exception of its latest product AirSense 11.

“We are ramping up and improving the availability of our best in class AirSense11 platform, which will gain further geographic regulatory approvals throughout the fiscal year and steadily increasing supply also throughout the fiscal year 2024 and beyond,” he said.

“Although challenges within the post-Covid supply chain haven‘t completely been mitigated yet, we expect ongoing steady improvement in component and end product supply in the quarters ahead.

For the full financial year, revenue surged 18 per cent to $US4.2bn, compared with analyst estimates of $US4.2bn. Meanwhile net profit vaulted 15 per cent to $US897.6m.

Wilson analyst Shane Storey said the company didn’t deliver the earnings beat that was expected. “Fourth results were broadly in line with our forecasts but 5 per cent below expectations in the US market hence the 9 per cent sell-off we see there in the aftermarket,” Dr Storey wrote in a note to investors.

“Investors should take advantage of this sell-off, following 4Q23 results. We are seeing another round of short-termism on the stock, bemoaning the gross margin impact of success.”

The company’s shares, which are also listed on the New York Stock Exchange, slumped from $221.23 to as low a $US199 in US trading before settling to $US219.95.

“We’d received feedback that AS11 (AirSense 11) ordering had improved in recent weeks but device supply may stay on an allocation basis for the next few quarters,” Dr Storey said.

“US device sales grew 25 per cent and this outperformance continued to weigh on GM (gross margin) mix, as did securing componentry for a planned AS11 acceleration.

“Competitive dynamics continue to weigh in ResMed’s favour, but the risk of things suddenly changing – Philips re-entry … remain a dampener on sentiment until AS11 remobilisation is realised.”

In January last year, Mr Farrell said the pandemic-induced supply chain crunch was limiting a windfall of up to $US350m that the company expected to reap from a product recall from rival Philips. Nevertheless, in August last year ResMed’s net profit surged 64 per cent as it reaped a windfall of up to $US70m from Philips’s recall.

Asked if ResMed could maintain its edge over its rival as Philips returned products to key markets, Mr Farrell believed it could.

“I think the reputation hit and the time to market is going to be a very slow progress for them, country by country.”

ResMed’s earnings per share for the year to June 30 jumped 11 per cent to $US6.44 versus analyst estimates of $US6.52.

Gross margin contracted 80 basis points to 55.8 per cent. Mr Farrell said he could “reverse engineer” the company’s margin by slowing product sales.

“But we’re not going to do that when a patient needs care,” he said.

“I will never turn down a patient if there‘s demand for a patient. We‘re going to take care of them, even if it’s a slightly lower gross margin. And by the way, it is really good gross profit dollars and we get to take that cash flow, as you saw a really strong cash flow in the quarter, and reinvest it in R&D.

“We continue to significantly grow our impact each quarter, improving over 160 million lives in the last 12 months, well on our way to helping 250 million lives in 2025.”

The company will pay a quarterly dividend of US48c per share on September 21.

Anna Croft has been appointed as Coles’ new chief commercial officer, effective January next year.

Croft is the current COO of Mecca Brands where she helped transform the retailers’ business operations for health and beauty.

She comes with 20 years of industry experience and has worked with leading retailers such as Tesco, Coles, Mecca Brands and WHSmith in the UK and Australia.

Coles CEO Leah Weckert said she is delighted that Croft is returning to Coles with significant leadership experience in both local and international retail.

“Anna will play an essential role with our team and suppliers to deliver exceptional quality products, innovative exclusive brands and convenient meal solutions for our customers at a great value.”

Casual brand Crocs has reported record quarterly sales of more than US$1 billion, reflecting a 12 per cent increase in constant currency terms over the previous year.  

The company’s growth was driven by Asia, where sales increased by 33.2 per cent, or by 39 per cent on a constant currency basis, and North America where direct-to-consumer (DTC) comparable sales grew by 12.9 per cent year on year.

Revenue of $160.1 million from Europe, the Middle East, Africa, and Latin America decreased by 0.2 per cent or 1.4 per cent when measured in constant currency.

“We achieved record quarterly revenues of over $1 billion, representing growth of 12 per cent on a constant currency basis to prior year,” said Andrew Rees, CEO. 

“Both the Crocs and HeyDude brands continue to gain share and bring in new consumers with our comfortable offerings, as evidenced by DTC growth of 26 per cent in the second quarter. We continue to invest behind our strategic priorities that are driving profitable growth.”

The business anticipates a consolidated sales increase of 12.5 per cent to 14.5 per cent in the third quarter of this year compared to 2022, translating to revenues of roughly $4 billion to $4.065 billion at exchange rates as of the end of the most recent reported period.

Washington | American fast-food chain Wendy’s has inked a deal with the world’s largest food franchisee and the new owner of Pizza Hut in Australia, Flynn Restaurant Group, to build 200 local Wendy’s stores starting in two years’ time.

In a deal foreshadowed by The Australian Financial Review in February, the Nasdaq-listed burger giant – the world’s third-largest after McDonald’s and Burger King – will pose a fresh challenge to local operators such as Hungry Jack’s.

Hungry Jack’s’ founder, billionaire Jack Cowin, has questioned Wendy’s’ ambitions in Australia after its foray in the 1980s failed.

Abigail Pringle, president for Wendy’s international and chief development officer, said that following the positive reaction from Sydneysiders to a one-day Wendy’s pop-up event in 2021, and the overwhelming interest in its arrival, the burger company was ready to formalise a deal.

Ms Pringle said Australia is a “high priority, strategic growth market” and that she was ready to take on competitors such as Mr Cowin.

“We clearly have [Mr Cowin’s] attention. But he does not have mine,” Ms Pringle said.

“I’m focused on the customer. And we’re focused on delivering on a great brand experience. I’d love to invite Jack to Wendy’s when we launch and maybe he can really experience for the first time a fresh, never frozen Wendy’s hamburger.”

In 1982, Wendy’s arrived in Melbourne, an expansion set up by one of its then major US franchisors, the Tennessee-based Johnston Southern Corporation.

Ms Pringle said the operating environment had changed significantly in 40 years and the Flynn Restaurant Group had “incredible experience” in the restaurant space.

Ms Pringle said Wendy’s competitive edge would come through freshness of product, supply chain advantages (it already has existing supply chains in Australia for its Asian and New Zealand markets), new look stores designs and the strength of the world’s largest restaurant franchisee.

“Flynn has a strong leadership team, great culture, vast industry knowledge, success with our brand in the US, and we are confident that Flynn Restaurant Group is the right partner to unlock growth for Wendy’s in Australia.”

Flynn operates Taco Bell and Pizza Hut in the US, as well as 190 Wendy’s shopfronts in five states and Washington DC.

It owns and operates 2600 restaurants including Applebee’s, Panera and Arby’s and generated $US4.5 billion in sales last financial year with over 75,000 employees.

Wendy’s said the agreement with Flynn would drive growth in Australia “primarily after 2025, with the ambition to hit 200 restaurants across the country through 2034, through a combination of equity stores and sub-franchise partners”.

Wendy’s transaction with Flynn includes a master franchise fee and an additional income stream from each of the Wendy’s stores once in operation.

Flynn’s chief operating officer Ron Bellamy said he looked forward to expanding the brand and was in the process of redefining what Australians should expect from quick-service restaurants.

“It is a tremendous brand with significant untapped potential outside of the US and we think it is an especially great fit for Australia, given the savvy nature of the Australian consumer,” Mr Bellamy said.

Average gross annual sales for a franchised Wendy’s restaurant in the US was $US1.75 million ($2.7 million) in 2020, with a standard 4 per cent revenue royalty fee.

Wendy’s also has separate agreements for non-traditional locations, such as petrol stations, food courts, military bases and delivery kitchens.

Wendy’s has, in the past, used incentives to promote new restaurant development. This year, in the US and Canada, it offered royalty, national advertising and technical assistance fee waivers for up to three years for some operators.

Wendy’s also typically charges a standard technical assistance fee for newly executed franchisees of about $US50,000 for each new restaurant opened.

Ms Pringle said there had been “really great contenders” to take on the master franchise for Wendy in Australia and a long list of those who wanted to take on a smaller number of Wendy’s store franchises.