In recent months, the news media has been awash with stories documenting the huge appeal in China of Australian products such as baby milk formula, vitamins, skincare and (more recently) food and groceries. The surging demand has been driven by a number of factors and looks set to continue. Investors can gain exposure to the trend through a number of Aussie stocks leveraging the demand from China.

Chinese demand

While the Australian sharemarket has fallen, the share prices of ASX-listed companies with exposure to the Chinese consumer have skyrocketed as their earnings are boosted by sales to China. Blackmores and Bellamy’s are two significant beneficiaries of the popularity of Australian-made wares. Their share prices have surged, up 390 per cent and 690 per cent respectively in the last 12 months, as their revenues from the Chinese market have soared. Other companies are keen to capitalise on the trend, including Woolworths and Metcash, which both recently announced their forays into the Chinese market via online shopping site Tmall.

Far and away the most popular product category for export to China is skincare. Recent Austrade data quantifying searches for Australian products on mammoth shopping websites Taobao (consumer-to-consumer) and Tmall (business-to-consumer) revealed 40 per cent were for skincare. Food and wine accounted for 19 per cent of searches and milk powder 16 per cent.

Increasingly, Australian companies looking to expand Chinese sales are favouring a model that cuts out middlemen and targets the consumer directly. Vitamin and herbal brand Swisse Wellness last month unveiled a strategy to consolidate its position in China with a direct-to-market approach. Marketing strategies using online channels alleviate the need for bricks and mortar stores, thereby reducing capital expenditure requirements and lowering the barriers to the world’s second largest market.

As the seemingly insatiable appetite for Australian-made products continues to grow and demand outpaces supply, additional purchasing channels have opened up, including the “grey market”. Rather than buying direct from the manufacturer or retailer, Chinese consumers can seek out Australian products through an intermediary such as an Australian-based consumer or business. The grey market also includes the practice of suitcase running, where Chinese consumers (or their family and friends) buy bulk quantities of favoured products on trips to Australia. Infant formula maker and marketer Bellamy’s Australia estimates that between 30 and 40 per cent of product sales in Australia in fact service the Chinese market. However, like most companies, they cannot accurately quantify the volume or type of products sold through grey market channels.


So what is driving Chinese demand for Made in Australia? Three key factors:

Confidence: Many Australian brands enjoy high levels of trust among Chinese consumers who seek products manufactured by established and reputable businesses. Chinese consumers are prepared to pay a premium for Australian products they consider to be safe and of a high quality, such as vitamins, honey and skincare products.

Urbanisation: As the proportion of China’s population living in urban centres grows rapidly so, too, do consumer spending habits, as city-dwellers enjoy greater discretionary incomes and appreciate Western lifestyle products. While 89.4 per cent of Australians live in urban centres, in China the proportion is just over half. This figure is set to grow, with projections that 1 billion people will live in a Chinese city by 2030.

Population growth: With 1.36 billion people, the People’s Republic of China is the world’s most populous nation. The population is growing at a rate of about half a per cent a year, or about 700,000 people. The progressive relaxation and final abolition last year of China’s one-child policy are expected to stimulate population growth and demand for Australian-made products, particularly baby products.

Gaining exposure

Several listed companies offer exposure to the upside potential of Chinese consumer demand for Australian products.

Blackmores : Blackmores first entered the Chinese market in 2013 and has expanded significantly there. Sales to China were estimated to account for more than a third of the company’s revenue  in the first quarter of 2016.

Bellamy’s Australia: Bellamy’s has been selling its products in China since 2014, initially through in-country distributors, although more recently it has seen a major shift towards online purchasing. Demand has grown, revenue from the company’s operations in China/Hong Kong jumping more than 160 per cent in 2015-16. Since listing in August 2014 with a market cap of $95 million, Bellamy’s share price has soared and its market cap has grown to more than $1.3 billion. A little over a year after its public float, it was counted as one of the ASX’s largest 300 companies. The company expansion plans include targeting distribution growth in China and the region, and pursuing multi-channel distribution both on and offline.

BWX: The manufacturer and marketer of natural hair and skincare products, including flagship brand Sukin, forecasts total revenue will grow 26 per cent this financial year. China is the primary focus of the company’s new offshore sales strategy, and overseas markets revenue is expected to grow 37 per cent. The naturally sourced Australian ingredients used in Sukin products are likely to be popular with Chinese consumers.

The a2 Milk Company: In mid-December, the manufacturer and marketer of the a2 Milk label reported better than anticipated sales of its new a2 Platinum infant formula, and forecast a surge in demand given the brand’s appeal in Australia and China. With the company’s profit expected to be between $33 million and $37 million (previously forecast to be $22 million), A2M’s share price jumped 34 per cent after the company’s announcement and is up 131 per cent over the last six months.


Dramatic falls on China’s sharemarket and a recent soft GDP figure appear to have done little to dent the confidence of consumers in the world’s second-largest economy.

Figures from the National Bureau of Statistics show December retail sales increased at an annual rate of 11.1 per cent. With a growing urban population and the positive reputation of Australian products among Chinese consumers, the upside potential for companies leveraged to China’s retail economy is considerable.

The China-Australia Free Trade Agreement, which came into force on December 20, will further enhance access to the Chinese market for Australian companies. For businesses targeting the Chinese market, the challenge will be to ensure quality is maintained as operations are scaled up.