Export Australian Skincare Products To China – Case Study

January 12.2018
export australian skincare to china

In 2016, Catherine Cervasio, owner of ALUXE skincare, celebrated a milestone. Her most well-known brand, Aromababy, marked 21 years in business. Ahead of its time and innovative in its approach to skincare, Aromababy was one of the first baby skincare products in the world to combine the use of natural ingredients with research.

How The Journey Started

The Aromababy journey began when Melbourne-based Ms Cervasio had her first baby and wanted to find natural and organic skincare. Not finding any, she went about developing the products herself.

“Our focus has always been on using the most up-to-date research and interpreting that information into formulations to help care for babies, particularly those with sensitive skin and eczema,” said Ms Cervasio.

The Export Journey

Originally a one-person start-up, Cervasio now has five staff to help her with operations and warehousing. ALUXE uses several laboratories in Australia that produce her formulations under licence to keep up with demand. Aromababy products are used in select maternity hospitals and by consumers across the world, including Hong Kong, Singapore, Taiwan, the Middle East, Korea and China.

“About 70 per cent of my business is now export,” Ms Cervasio said. “Five years ago, I started exporting to China – and now China accounts for about 40 per cent of our overall export business.

Preparation For China

“Over the past five years, we have invested both time and money in China. We have done a lot of homework and been there on the ground from the beginning – having meetings, training people, building alliances with health professionals and establishing important business relationships.

“We registered three brands as trademarks and ten skincare products in China, which is unique within our sector and a great selling point,” she said. “In negotiating with Chinese business partners, they are always extremely impressed that we have both trademarks and products registered to sell offline in retail stores in the region.”

Aromababy sells to retail stores, which it believes is integral to brand positioning. “Consumers want to ‘experience’ and have an emotional connection with our products; bricks-and-mortar stores provide this opportunity for new mothers, who are the main buyers of our products,” said Ms Cervasio.

To build on Aromababy’s presence in China, Ms Cervasio attended Australia Week in China 2016. “It was a fantastic experience – it showcased our leading skincare brands while providing further access to potential clients,” she said. The entry into force of the China-Australia Free Trade Agreement (ChAFTA) in December 2015 will help Aromababy expand in the market.

New Markets

Ms Cervasio has also been exporting to Korea for the past 10 years and can now take advantage of the Korea-Australia Free Trade agreement (KAFTA), which came into effect on 14 December 2014.

Inspired by the entry into force of the Japan-Australia Economic Partnership Agreement (JAEPA) on 15 January 2015, Ms Cervasio said: “We are working on leads in Japan at the moment. Japan is a new region for us. While we participated in a trade mission there, negotiations are slow, which is commonplace in parts of Asia.

“Patience is key. Maintaining contact, face-to-face visits and building rapport are all vital. We hope to launch in Japan towards the end of 2016, at which time some of the tariff reductions will have come into play, shaving off some of our landed-cost.”

With immediate reductions in duty for products under both ChAFTA and KAFTA, and further reductions coming, Ms Cervasio said: “The tariff reductions are positively impacting on what we’re doing. The reduction in tariffs means our Chinese and Korean partners have a greater margin and can use the extra dollars for marketing or educational campaigns. This translates to a greater capacity to develop our business.”

Ms Cervasio believes the FTAs will have enormous long-term benefits for her business. “We have been approached by several substantial companies in China in terms of investment. In Korea we have seen orders increase over the past six months, whereas they had dropped off over the past two years. We will likely partner with another larger organisation in the future. There is too much interest for that not to happen. I’m looking forward to seeing our business grow as part of a larger team.”

Since the FTAs came into effect, Ms Cervasio said Aromababy is seeing growth in terms of sales and have increased their team accordingly with plans to recruit more staff.

“We recently employed a new Chinese-speaking team member who will support us with translation services and enable a quicker turnaround when working on China-specific marketing and advertising collateral. We have experienced a 30 per cent growth in sales in the past six months. We expect our team to grow further over the next 12 months, in line with our sales; which are tracking to double within two years.”

Ms Cervasio said ChAFTA and KAFTA aren’t just about reductions in duty. “The FTAs have increased the confidence of potential distribution partners and investors. They can see the relationship with Australia as continually improving, which has encouraged them to look at what Australian businesses have to offer. Previously, the focus may not have been on Australia but on other parts of the world. I believe by having a free trade agreement in place, it puts additional focus on Australian business and provides opportunity, which is something that will benefit not only the businesses involved, but our Australian economy overall.”

Source: 2016, https://www.austrade.gov.au/

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