Difficult market situation
The Baby Care division was affected by rising raw material and milk prices in the first half of 2022. With a share of turnover of 18.8% and net sales of CHF 27.4 million in the first half of 2022 (–1.6% compared to the same period last year), the Baby Care division is an important source of revenue for the HOCHDORF Group, with above-average margins. HOCHDORF increased the prices of around half of all Bimbosan products in Switzerland at the beginning of the year, but has not yet made any further adjustments. This is currently under further review. Bimbosan's leading market share in the Swiss specialist market (pharmacies and chemist shops), which already rose to just under 40 per cent in the last half of 2021, increased again to 41.6 per cent.
Abroad, HOCHDORF was able to grow further in the Baby Care division with customers in Central America. We are involved in intensive discussions about the drastic short-notice increases in costs of raw materials and ingredients and the rising exchange rate with private label customers all over the world and implementing price adjustments as quickly as possible. The aim is to maintain mutually fruitful and profitable customer relationships through this challenging period in a spirit of partnership and, in turn, to freeze or systematically end unprofitable customer relationships.
Close collaboration with Pharmalys
Despite the very pleasing sales of HOCHDORF's high-quality baby care formulations and Pharmalys products in North Africa and the Middle East, difficult challenges remain in the collection of old receivables. Intensified cooperation at the operational level has meant future sales volumes are subject to a transparent and reliable payment regime. The gradual reduction of legacy receivables from customers is now subject to a tight liquidity process with payment arrangements that are confirmed at least once a month.
Milestone reached: successful registration in China
After more than four years of extraordinarily intensive work, we have finally succeeded: HOCHDORF has received approval to manufacture products for the Chinese infant nutrition market on behalf of our partner, the leading infant formula brand Biostime from the global health and nutrition company H&H Group. This is impressive proof of HOCHDORF’s quality and competence as an approved manufacturer, which is needed to meet the strict requirements in this market. The approval has been communicated internationally via an online platform for imported products (State Administration for Market Regulation, SAMR). This is essential for the next steps we will take in partnership with Biostime’s parent company, the H&H Group. Revisions of the local food law are due at the beginning of next year which involve the review and resubmission of the formulations for the SIGMA Star brand. We therefore do not expect the first sales until mid-2024.
Taskforce formed for entry to the US market
A short-term supply emergency caused quality problems with the dominant US market leader and a correspondingly strong demand for alternative suppliers for infant and follow-on formula was experienced in the US at the beginning of the year. Producers from all over the world were approached for additional supplies. HOCHDORF does not yet have marketing authorisation for the US market. Thanks to a quickly formed task force, the registration process for the FDA (United States Food and Drug Administration) was initiated within a few weeks using an accelerated procedure. Discussions with local trading partners are ongoing to clarify the level of demand and time frames. In the best case scenario, deliveries could begin in the final quarter of 2022.
New product launches
The newly launched Bimbosan Bisoja 2 started well in the first half of 2022, with sales figures in the expected range. A rice-based product, Riso PH, has also been added to the product range. The new goat milk formulations for Bimbosan launched last year are also beginning to impact the market. Together with the important HOCHDORF partner Pharmalys, the Baby Care team revised the complete baby care range for the MENA (Middle East & North Africa) region at the beginning of the year due to a change in the law, resulting in a relaunch on the market in new packaging with different product positioning. The new products include the premium brand Ultima with HMO (Human Milk Oligosaccharide).
Donations for Ukraine
Together with the mooh milk cooperative, HOCHDORF has made milk powder available at attractive terms for donations for the aid project “St. Gallen helps Ukraine”. In addition, 3,300 packs of Bimbosan, 885 kilos of milk powder and 1,440 tubes of condensed milk were sent to Ukraine for a privately organised convoy delivery.
Review of the product portfolio and strengthening of the sales team
As detailed in the Letter to the Shareholders, HOCHDORF focused on the strategic and operational review of the product portfolio and contract structures in the first half of 2022. Unprofitable or overly rigid contract terms were renegotiated; the majority of contractual relationships will be adjusted this year. However, some of these optimisations will extend into 2023 and are not expected to take full effect until mid-2023. At the same time, HOCHDORF is also strengthening the Sales and Innovation departments in terms of personnel: Gerina Eberl-Hancock (Chief Revenue Officer) and Lukas Hartmann (Chief Innovation Officer) joined Group Management in May 2022. The sales and marketing teams have merged and are geared towards opening up new and promising business segments in the future (such as specialist foods for all age groups or the market for “alternative ingredients”). HOCHDORF has allocated specific resources to develop these areas.
In the Baby Care division, HOCHDORF will continue to focus on growth opportunities in existing markets such as the MENA region and Central America in the second half of 2022, while at the same time setting the course for markets such as China and the US thanks to successful registrations. For the Bimbosan brand, the aim is to strengthen the newly introduced, innovative additions to the range with plant-based alternatives to cow's milk, in addition to intensified marketing measures for optimising sales and digitalisation.
Our many years of expertise and innovative strength combined with Swiss quality make us a sought-after partner for premium food specialities worldwide – in the infant formula sector and beyond.
HOCHDORF has been developing high-quality Swiss infant formula for over 100 years. We process all raw materials on site at two production sites in Switzerland – using ingredients from Switzerland wherever possible. We are the only supplier in Switzerland to work with Swiss cow's milk and our own lactose and whey powder, which means that we can produce a large proportion of the ingredients ourselves, depending on the product. This has the advantage that we can monitor the quality at every step of production and thus meet the strictest requirements. It also means we can contribute to sustainable, local production. In our infant nutrition or Baby Care range we offer products for expectant mothers, new-born infants, babies and preschool children. In addition to our Bimbosan and Babina brands, we are a specialist manufacturer of third-party brands from all over the world. Our experienced team advises interested resellers on products (development and production), registration, marketing, packaging and logistics.