Good News on Listing | Frost & Sullivan Assists Newman's Health Foods Holdings Limited to Successfully List on the Hong Kong Stock Exchange (2530.HK)

Newman's Health Foods Holdings Limited (hereinafter referred to as 'Newman's') successfully listed on January 10, 2025. The company plans to issue 2.5 billion H shares globally, of which approximately 10% will be publicly offered in Hong Kong, about 90% internationally, and an additional 15% will be underwritten through an over-allotment. The issue price per share is HK$0.8 - 1.09, with an estimated net proceeds from global issuance of approximately HK$15.63 billion.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the issuer's competitive advantages, assisting the issuer, investment banks and other intermediaries in completing the writing of relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business and other important chapters), assisting the issuer in communicating with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company has been deeply rooted in the maternal and infant nutrition industry for many years, with a solid market positioning and high brand recognition;

   

• The company won the 'Tmall International Category Champion Camp' award in 2023;

   

• In 2023, the company ranked first among Chinese algae oil DHA brands in terms of retail sales value of algae oil DHA products;

   

• In 2023, the company ranked first among domestic brands of algae oil DHA in China, based on the retail sales value of algae oil DHA products;

   

• In 2023, the company ranked as the largest brand in China in terms of retail sales value of algal oil DHA products made from imported raw materials.

According to a report by Frost & Sullivan:

• For the year ended December 31, 2023, in terms of retail sales value of algal oil DHA products, the company ranked first in the algal oil DHA brand market in China with a market share of 4.7%;

   

• For the fiscal year ended December 31, 2023, in terms of retail sales value of algal oil DHA products, the company ranked first in the domestic brand market for algal oil DHA in China, with a market share of 8.1%;

   

• For the fiscal year ended December 31, 2023, in terms of retail sales value of algal oil DHA products, the company ranked first in the domestic market for algal oil DHA brands that use overseas suppliers for raw materials, supplying raw materials, with a market share of 20.5%, based on the retail sales value.

International brands have traditionally relied on high-quality raw materials, continuous R&D investment, and higher product quality to occupy significant market shares in the early stages. However, with domestic algae oil DHA companies achieving technological breakthroughs, the purity and quality of extracted DHA have been continuously improving, while production costs have been declining, promoting growth among domestic players.

The market scale of international players shows an increasing trend, rising from RMB 3.2 billion in 2018 to RMB 5.9 billion in 2023, with a compound annual growth rate of 13.0%. In 2023, the retail sales value of domestic brands of algae oil DHA products produced with imported raw materials accounted for about 1.4% of China's entire nutritional product industry. Over the next five years, it is expected that the market scale will expand to RMB 8 billion by 2028. With the rise of domestic products and increased consumer acceptance, the compound annual growth rate during this period is expected to slow down to 6.3%.

In contrast, the market scale of domestic manufacturers has increased from RMB 3.7 billion in 2018 to RMB 8.1 billion in 2023. It is expected that this strong growth momentum will continue, reaching RMB 13.1 billion by 2028. Specifically, the market scale of domestic manufacturers that supply raw materials from overseas suppliers has grown strongly from RMB 1.4 billion in 2018 to RMB 3.6 billion in 2023, with a compound annual growth rate of 20.8%. It is expected to reach RMB 6.2 billion by 2028. Meanwhile, the market scale of domestic manufacturers that supply raw materials from local suppliers has increased from RMB 2.3 billion in 2018 to RMB 4.5 billion in 2023, with a compound annual growth rate of 14.4%. It is expected that from 2023 to 2028, the compound annual growth rate will continue at 8.9%, reaching RMB 6.9 billion by 2028.

In the fiscal year 2023, the total sales value of algae oil DHA products from the five major brands was approximately RMB 25.799 billion, accounting for 18.4% of the entire market. In 2023, the group's retail sales value in the Chinese algae oil DHA market was RMB 6.588 billion, ranking first and accounting for approximately 4.7% of the market share.

In the fiscal year 2023, the total sales from algae oil DHA products of five major domestic brands amounted to approximately RMB 19.996 billion, accounting for 24.5% of the relevant market. In 2023, the group ranked first in retail sales value of algae oil DHA in China, reaching RMB 6.588 billion, accounting for approximately 8.1% of the market share.

From 2018 to 2023, the market size of the maternal and infant nutrition industry steadily increased from about RMB 60.9 billion in 2018 to about RMB 101.7 billion in 2023, with a compound annual growth rate of approximately 10.8%. This was mainly due to increased health and nutrition awareness, enhanced consumer purchasing power, and the Chinese culture of 'hoping for a son to become a dragon'. As the market matures, it is predicted that the market size of the maternal and infant nutrition industry will continue to grow, reaching about RMB 142.1 billion by the end of 2028, with a compound annual growth rate of about 6.9%, based on retail sales value. The market size generated by international players increased from RMB 223,303 million in 2018 to RMB 351,258 million in 2023, with a compound annual growth rate of 9.5%. The growth can be attributed to their strong brand value, excellent product quality, and effective marketing strategies. However, the growth rate of international players is expected to slow down, with a compound annual growth rate of 5.6% from 2023 to 2028, and the market size is expected to reach about RMB 460,454 million by 2028.

In contrast, the growth trend of domestic industry players is very good. The market scale increased from RMB 385.472 billion in 2018 to RMB 665.454 billion in 2023, representing a compound annual growth rate of 11.5%. The growth is evident mainly due to domestic players' understanding of local consumer preferences, competitive pricing strategies, and expansion of distribution networks. Looking ahead, domestic industry players expect to maintain a strong growth rate, with a compound annual growth rate of 7.6%, reaching RMB 960.192 billion by 2028. Although the decline in birth rates may have a negative impact on the maternal and infant nutrition industry, the public's increasing emphasis on the importance of maternal nutrition for infants' health and development has stimulated demand for maternal and infant nutrition products. At the same time, parents born in the 1990s and 1995s have become the core consumer group, with most of them valuing scientific and meticulous parenting methods. Therefore, consumption of maternal and infant nutrition products has increased and is expected to continue to grow significantly.

In the fiscal year 2023, the total sales value of mother and baby algae oil DHA products made from algae oil DHA raw materials supplied by overseas suppliers by the five major domestic brands was approximately RMB 19.974 billion, accounting for 62.3% of the entire related market. The group's retail sales value was approximately RMB 6.588 billion, ranking first, accounting for approximately 20.5% of the market share.

Expand online channels:

Online channels for mother and baby algae oil DHA have seen rapid growth in the past few years, and this trend is expected to continue for several more years. The gradual popularization of online channels for mother and baby algae oil DHA is mainly due to word-of-mouth among the public. Imported products are more popular than domestic-made ones. In addition, consumers tend to purchase products directly based on recommendations from friends or KOLs on social media platforms.

Major nutritional supplement brands have increased their investment in marketing and promotion in recent years, aiming to strengthen their brand recognition (especially through online marketing and promotion on different social media platforms) and increase traffic to online sales channels. For example, one major nutritional supplement brand spent about 28.9% of its 2023 revenue on marketing and promotion. The level of marketing and promotion expenses allocated to online marketing channels is closely related to the sales confirmed through online channels, provided that the correct marketing strategies and channels are adopted.

In today's digital marketing landscape, the use of private domain traffic is becoming increasingly popular, as consumers value personalized and meaningful interactions with brands and companies. Brands and companies that effectively utilize private domain traffic can create stronger relationships, increase customer loyalty, and drive sales growth.

Generally speaking, sellers of private domain traffic sales and distribution products use their own channels to directly contact customers, building a more personalized and controllable shopping experience. Sellers typically establish their own private potential buyer databases and create private groups with these potential buyers on platforms such as WeChat and Douyin, as well as other exclusive forums, to promote and sell products.

Since interactions occur within the private domain managed by companies or brands, compared to public platforms, less resources can be spent competing for exposure and attention, and greater control over customer data and awareness is possible. This helps to operate with a deeper understanding and customized marketing strategies. Conversion rates can be improved by creating exclusive and personalized interactions, as customers generally have a sense of belonging and are more likely to respond and return.

The regulatory system is gradually maturing:

Due to the complexity of registration procedures and the regulatory system being different from international standards, the development of the maternal and infant algae oil DHA market has been severely hindered, weakening the willingness to launch products from other countries. Terminal customers have no choice but to purchase products that have not obtained certification or passed testing, further affecting the overall product quality of maternal and infant algae oil DHA. Looking ahead, both the regulatory system and the market itself are becoming more mature and efficient, attracting more domestic and international operators to enter the market.