H&H Group reports single-digit revenue decline in Q1 2024

Media release – 17 May 2024

Leading global family nutrition company Health and Happiness (H&H) International Holdings Limited ('H&H Group' stock code: 1112.HK) has announced its unaudited operational statistics for the three months ended 31 March 2024. The Group's total revenue decreased by 8.8% year-on-year on a reported basis (9.3% on a like-for-like (LFL) basis) to RMB2,871.4 million.

Akash Bedi, Group CEO and CEO of North America, Europe, Middle East and India at H&H Group, says he's very pleased with the continued strong performance of the Adult Nutrition and Care (ANC) segment and steady growth from the Pet Nutrition and Care (PNC) segment. Despite a challenging first quarter for the Baby Nutrition and Care (BNC) segment, the Group remains focused on taking steps to achieve its full year targets.

"During the first quarter of 2024, our Adult Nutrition and Care segment performed particularly well, achieving double-digit growth (14.3%) due to successes in our core markets of mainland China (outpacing overall market growth) and Australia & New Zealand where we have further cemented our leading positions. We've continued to navigate issues across the IMF industry in mainland China which has in turn affected our Baby Nutrition and Care segment as a whole. The issues stem from the knock-on effects of transitioning to the new GB IMF standards, alongside adapting to a contracting IMF industry; however, we expect stabilisation during the second half of the year. Conversely, our super-premium IMF segment is going from strength to strength in mainland China as we continue to gain market share from 11.7% to 12.8%, notwithstanding a shrinking category overall. Our Pet Nutrition and Care segment also maintained growth (3.4%), as Zesty Paws launched across Europe and Southeast Asia, a significant milestone in our globalisation journey. Nutritional supplements continued to be our key growth driver making up 70.3% of our total revenue."


The Group has sustained a healthy level of liquidity with a cash balance of RMB2.1 billion. In addition, H&H has completed a RMB bond issuance and a USD bond tap, as well as obtained substantial credit commitments or approvals for RMB and USD loans for the coming refinancing of its existing USD term loan and the extension of its debt maturity.


In mainland China, the Group's largest market, revenue decreased 17.4% year-on-year on a LFL basis, despite a particularly strong quarter for the ANC segment which achieved double-digit growth (12.3%). Swisse fortified its no.1 position in the mainland China online VHMS market[^1] and rose to become the no.2 brand in the overall VHMS market[^2], in spite of the high base effect following a one-off surge in demand post-COVID in the same period last year. Mr Bedi says, "Our ANC segment in mainland China continues to excel, accounting for 63.5% of total ANC Group sales, as we continue to diversify our product portfolio with ranges such as Swisse Me and Little Swisse to capture a larger consumer base. Swisse Plus continues to stand out, making a double-digit contribution to total ANC China revenue."


The overall decline in revenue in mainland China was largely due to the decline in IMF sales (34.4%) because of issues affecting the entire industry. Nonetheless, the Group expanded its market share in the super-premium IMF segment and rose to no.3 position[^3], while the overall super-premium IMF segment in mainland China shrunk by 24.7%.


Mr Bedi comments, "In the 12 months to 31 March 2024, the entire IMF industry in mainland China contracted 12.2%[^4], in addition to navigating the transition to the new GB standards. Alongside this, we are gradually depleting the old 'GB approved' IMF stocks in the channels which led to a lower sell-in, compared to a more moderate sell-through decline of 12.7%. Specifically, sell-through of our goat IMF declined by 38.0% as stock of our older series of imported goat IMF ran out amid the delayed approval of our new 'GB' goat IMF series, while the decline in sell-through of our cow milk IMF was confined to 10.1%. Despite this, our super-premium IMF series is performing exceptionally well, achieving no.3 in its category[^5]."


Due to the high base effect following a one-off surge in demand for probiotics in the same period last year, sales of paediatric probiotic and nutritional supplements in mainland China decreased by 41.0%. Mr Bedi adds, "Whilst we saw an overall decrease in sales, within this category, sales of paediatric nutritional supplements grew by 159.5% and contributed 14.1% of total paediatric probiotic and nutritional supplements sales, driven by increasing demand for paediatric nutritional supplements, including for our innovative products such as probiotic gummies, DHA and calcium. We have also remained laser-focused on strengthening Biostime's position as the leading paediatric nutritional supplement brand in mainland China."


Mainland China's PNC segment revenue decreased 15.1% due to restructuring and focusing on premiumising Solid Gold. Nevertheless, the brand maintained its no.2 position[^6] with distribution reaching over 9,900 pet stores and pet hospitals in the offline Chinese market.


In Australia and New Zealand (ANZ), the Group continued to see double-digit growth while reinforcing its no. 1 position in the overall Australian VHMS market[^7]. Mr Bedi comments, "We're really pleased with the strong growth momentum of ANZ, enhancing its growth trajectory and expanding its market share from 11.3% to 12.2% year-on-year[^8]. This is thanks to disruptive marketing campaigns, focusing on premiumising our product portfolio, along with the strength of our innovations such as Swisse Gummies which remained a key growth driver securing no.2 in the market and 14.9% market share[^9]."


Revenue in North America expanded 4.0% as the Group continued benefiting from growing pet ownership numbers and pet nutrition trends. Zesty Paws revenue grew by 5.5% compared to a high base effect following its rapid offline channel expansion in 2023 into prominent retailers such as Walmart, Target, PetSmart, CVS and Tractor Supply. "We're proud to see Zesty Paws achieve a market share of 10.4% in the retail channel[^10]. Offline expansion has also been very successful, as of 31 March 2024, Zesty Paws and Solid Gold were present in more than 17,000 and 4,500 stores, respectively, across the US."


Solid Gold sales experienced a slight decrease of 2.0%, attributed to ongoing channel optimisation and portfolio premiumisation efforts aimed at driving long-term profitable growth.


The Group's 'Other Territories' saw a revenue increase of 8.3% driven by Italy, Hong Kong SAR, Thailand, India and the Middle East. "It is fantastic to see many of our other territories retain most of their market share rankings," adds Mr Bedi, "paving the way to see our brands leading around the world. In addition, expanding the IMF business outside of mainland China remained a key priority for us, especially in France where we maintained our no. 1 positions in the organic IMF category and the goat milk market category in the French pharmacy channel, with market shares of 41.0% and 42.2% respectively[^11]."


Zesty Paws further progressed with globalisation by launching in the UK, Europe and Southeast Asia.


Revenue by product segment and geography (unaudited)

For the three months ended 31 March
All financial data are unaudited and recorded in RMB million

Revenue by product segment

	2024	2023	Reported Change %	LFL Change[^12] %
Nutritional Supplements	2,018.7	1,931.1	4.5%	3.8%
- VHMS products	1,491.9	1,281.5	16.4%	16.2%
- Paediatric probiotic and nutritional supplements	223.5	376.4	-40.6%	-40.6%
- Pet supplements	303.3	273.2	11.0%	7.1%
Infant Formulas	625.0	931.2	-32.9%	-32.9%
Others[^13]	227.7	285.2	-20.2%	-21.2%

Revenue by business segment

	2024	2023	Reported Change %	LFL Change %
Adult nutrition and care products	1,498.9	1,310.9	14.3%	14.1%
Baby nutrition and care products	909.0	1,389.6	-34.5%	-34.5%
Pet nutrition and care products	462.9	447.9	3.4%	0.3%

Revenue by geography

	2024	2023	Reported Change %	LFL Change %
Mainland China	1,846.0	2,233.8	-17.4%	-17.4%
ANZ	465.4	396.2	17.4%	16.8%
North America	390.1	362.0	7.8%	4.0%
Other Territories	169.9	156.4	8.6%	8.3%

Group Total

	2024	2023	Reported Change %	LFL Change %
Group Total	2,871.4	3,148.4	-8.8%	-9.3%

Looking ahead, the Group remains committed to driving long-term sustainable growth through its pivotal growth driver, nutritional supplements, while upholding its leading positions and market shares around the world. Mr Bedi concludes, "We are focused on solidifying our no.1 positions in our core markets of Australia and New Zealand and mainland China across our ANC business. For BNC, we expect the IMF category in mainland China to stabilise during the second half of 2024, leveraging Biostime's status as the leading paediatric nutritional supplement brand and continuing to invest in innovative new products. For PNC, we will continue to expand Zesty Paws' leadership in North America while optimising global launches across Europe and Southeast Asia. For Solid Gold, premiumisation remains our core focus as we enhance our existing product portfolio."


The Group is also committed to deleveraging its balance sheet and optimising its capital structure. This includes extending the maturity of its debt instruments where possible.

About H&H Group

H&H Group is a global health and nutrition company. Dynamic, courageous and ambitious in its mission to make people healthier and happier, the Group strives to inspire wellness while contributing positively to the needs of society and the planet. The Group has three business segments – Adult, Baby, and Pet Nutrition and Care – supporting whole-family health and happiness, with premium brands providing nutrition and wellness solutions backed by science. Consumer brands include Biostime, Swisse, Zesty Paws, Solid Gold Pet, Dodie, Good Goût and Aurelia London. The Group is headquartered in Hong Kong SAR and listed on the Hong Kong Stock Exchange ("H&H INTL HLDG" stock code 1112), with a second head office in London. H&H operates in 18 countries and has more than 3,300 team members. www.hh.global/#/Home

For media inquiries, contact:

H&H Group

Annabel Jenkins
+44 7514 535600
annabel.jenkins@hh.global

Think Alliance Group

Matthew Schultz
+852 3481 1161
matt.schultz@think-alliance.com

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[^1]: According to research statistics by Early Data, an independent data provider, Swisse ranked No. 1 in the China online VHMS market with a market share of 8.1% for the twelve months ended 31 March 2024 as compared with 7.8% for the twelve months ended 31 March 2023.
[^2]: According to research statistics by Kantar Consumer Panel, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^3]: According to research statistics by Nielsen, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^4]: According to research statistics by Nielsen, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^5]: According to research statistics by Nielsen, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^6]: According to research statistics by SmartPath, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^7]: Based on total market unit sales, according to research statistics by IQVIA, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^8]: Based on total market unit sales, according to research statistics by IQVIA, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^9]: According to research statistics by IQVIA, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^10]: According to research statistics by NielsenIQ Byzzer, an independent research company, market share data for the 52 weeks period ended 30 March 2024.
[^11]: According to research statistics by GERS, an independent research company, market share data for the past twelve months ended 31 March 2024.
[^12]: For illustrative purposes, the exchange rates of AUD1=RMB4.6995 and USD1=RMB7.1025, AUD1=RMB4.6712 and USD1=RMB6.8476 have been used for the preparation of the unaudited consolidated revenue of the Company for the three months ended 31 March 2024 and comparative figures for the same periods ended 31 March 2023, respectively.
[^13]: Others include pet food from Solid Gold, baby food and snacks from Good Goût, baby accessories from Dodie and other skincare products.