In today's rapidly evolving landscape, leading dairy enterprises are re-evaluating their strategies and aggressively pivoting towards new developmental opportunitiesAgainst this backdrop, Hangzhou H&H International Holding Co., Ltd, commonly referred to as H&H Group, is positioning itself as a formidable contender in the high-end nutrition and health industry on a global scale, continually projecting a series of positive developments.

This November, H&H released its operational data for the third quarter of 2024, shedding light on its innovative solutions to navigate the challenges posed by China's premium infant formula market amid industry restructuringThe company's latest financial report underlines its commitment to successfully transition through the "New National Standards," a crucial phase dictated by regulatory changes in the sector.

In line with these transitions, the nutrition supplement segment within H&H Group has experienced stable growth, serving as a significant driver behind its overall financial performance

The health and nutrition business (ANC) for adults recorded an annual growth of 8.2% during the reporting period, showcasing its robust performance across mainland China, Australia, New Zealand, and other expanded marketsAdditionally, the pet nutrition and care (PNC) segment also demonstrated growth, escalating by 5.4% year-on-year, further adding to the group's diversification.

Compounding these efforts is the demographic decline in newborns in China, which has adversely impacted the domestic demand for infant formula products, ultimately contributing to a slowdown in overall growthSimultaneously, the introduction of new stringent regulatory standards has led to a continual reshuffle within the industryAmid such challenges, H&H Group is rapidly facilitating a strategic pivot towards specialized nutrition, exploring expansive avenues for growth.

Demand for adult nutritional products is on the rise

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As fertility rates in China decrease, the infant formula market faces daunting challengesData from Nielsen IQ reveal a staggering 13.9% decline in total sales across all channels for infant formula in China in 2023, with offline channels witnessing an even steeper drop of 17.5%.

However, conversely, there is a rising awareness regarding health and well-being among consumersThe concept of "nutrition for the entire family" is gaining acceptance, as noted in the GWI Global Health Economy Report, indicating that the global health economy is projected to reach approximately $4.4 trillion, with expectations of climbing to $7 trillion by 2025.

To adapt to the structural transformations of the industry, H&H Group is recalibrating its strategy to target the family nutrition market, emphasizing health-driven and high-end positioningTheir market approach is expanding beyond just infants, encompassing all age groups, particularly yielding significant results in the adult nutrition and care segment.

In the first nine months of 2024, H&H Group's revenue from adult nutrition and care products surged to 4.98 billion yuan—a remarkable year-on-year increase of 8.2%. Within this space, the Swisse brand, a subsidiary of the group, has notably thrived, achieving a 6.7% increase in the Chinese market, thus accounting for a staggering 64.2% of the group's revenue from adult nutrition and care products.

According to research by independent data provider Early Data, Swisse has secured the leading position in China's online market for vitamins, herbs, and mineral supplements, retaining its 7.9% market share as of September 30, 2024, which symbolizes a consistent performance metrics seen since September 2023.

Reviewing historical datasets, it is evident that H&H Group's adult nutrition and care segment has consistently demonstrated revenue growth since 2021. The continuous robust performance this year underscores that the foundation of H&H's adult nutrition and care business remains solid.

In totality, with nutrition and health products comprising over 60% of its revenue and brands like Swisse firmly establishing themselves within their segmented markets, H&H Group is not merely a leader in infant formula but is evolving towards becoming a prominent global player in family nutrition and health.

Moreover, the current trend is illustrated by an emerging focus on premium and snackable nutrition offerings

The high-end market is increasingly transforming into the battlefield where leading companies contest for market share.

This year, despite challenges faced within the infant formula sector, H&H Group has diversified into ultra-premium formula products and boosted the market competitiveness of its "New National Standards" seriesThe infant nutrition and care (BNC) segment delivered stable results, generating 3.2 billion yuan in revenue.

Nielsen data indicates that as of September 30, 2024, H&H Group's ultra-high-end infant formula maintains a commendable third place in market rank, with its market share increasing from 11.8% to 13.1%, even spiking to 14% in September.

On the flipside, as health-consciousness rises, nutritional supplements are witnessing a trend towards premiumization and snackificationWith the expanding middle class in China, the nation is projected to house a considerable share of the global middle class by 2030. This demographic shift is driving substantial product upgrades and the evolution of brands towards higher quality offerings.

A quintessential example of this trend can be witnessed in the market for gummy supplements

Renowned for their chewier texture and palatable experience, gummy supplements are increasingly preferred for their ease of consumptionAccording to the NBJ-Supplement Business Report, the market scale for nutritional gummies in China reached approximately 3 billion yuan in 2022, achieving an extraordinary annual growth rate of 20%.

In 2021, the National Market Supervision Administration introduced new categories for health products, recognizing gummy and powder forms alongside traditional tablet and capsule formats, signifying that products like gummies are now nationally sanctioned as permissible means of nutrient delivery.

Capitalizing on this inclination, H&H's Swisse Me gummy series has debuted an array of products including probiotic gummies, lutein ester gummies, and collagen gummies among othersProbiotic gummies are crafted with effective strains recognized for fostering gut health, while lutein ester gummies contain lutein esters and carotenoids to provide ocular protection.

It's essential to consider that this snackification trend in health supplements has achieved normalization in regions like Europe, Japan, and North America; however, China is still in early stages of this transition, suggesting a vast market potential yet to be fully tapped.

With the industry entering an adjustment phase, the ability for companies to initiate innovative investments is imperative for unlocking new growth avenues

Recently, H&H Group has been augmenting its innovation capabilities whilst continuing to improve supply chain integration.

The report indicates that H&H Group's research and development expenditures rose by 22.5% year-on-year in the first half of 2024, motivated by its commitment to product innovationNotably, a pilot laboratory for nutritional health food was inaugurated, representing a transitional stage from lab-scale production to commercialization, fulfilling early experimental design requirements.

Presently, H&H Group has established a dual-driven product R&D system while investing in six major research centers across Australia, Europe, and Asia over the past decadeAs of the first half of 2024, the group had published 49 research papers in SCI, with 56 invention patents applied for in domains including breast milk bioactive components.

In addition to advancing product sales and R&D investment, the challenge of achieving sustainable development remains pertinent for major corporations

As a leader in the high-end nutrition and health sector, H&H Group is committed to fulfilling its corporate social responsibilities, integrating sustainability into its overarching strategic framework.

For example, H&H Group has pledged to reduce scope 1 emissions (direct emissions from sources the company controls) by 46.2% by 2031 and aims to derive 100% of its electricity from renewable sources by 2030. The group is also actively implementing environmentally friendly packaging solutions and promoting recyclability in its product packaging, fostering a green consumption atmosphere nationallyFurthermore, H&H is striving to ensure that suppliers responsible for 52% of its supply chain expenditures establish scientific emission reduction targets by 2027 to jointly address climate change challenges.

Looking ahead, H&H Group is set to continue its deepening efforts in the family nutrition and health landscape, consistently broadening its market share through strategic branding and product innovation, as it edges closer to realizing its aspiration of becoming a global leader in the high-end nutrition and health industry.