Online NewsYou are reading the full text of a subscriber-only online news item, provided by the publisher to Isentia for your exclusive use as part of your Isentia service. © 2015 News Corp Australia Copyright Agency.

Victor Smorgon Group finds a infant formula to boost agricultural offerings to China

by DAMON KITNEY
THE AUSTRALIAN, 23 Jul 2015 12:00AM

Victor Smorgon Group, the investment company formed by the late patriarch of the billionaire Smorgon family, is selling infant formula over the internet to wealthy Chinese families as the next step in its strategy to offer specialty Australian agricultural products into China. Over the past 18 months the group has been ­quietly developing a business called NutraCare, which is now selling infant formula products manufactured by Gippsland dairy pro

Victor Smorgon Group, the investment company formed by the late patriarch of the billionaire Smorgon family, is selling infant formula over the internet to wealthy Chinese families as the next step in its strategy to offer specialty Australian agricultural products into China. Over the past 18 months the group has been ­quietly developing a business called NutraCare, which is now selling infant formula products manufactured by Gippsland dairy processor Burra Foods through online channels in China.“We are looking to provide full traceable Australian product at Chinese infant formula pricing,’’ VSG managing director Peter Edwards said. “So far the sales have been good. Our aim is to get up to 20,000 subscribers. The aim is then to look at what other products we can put though that chain.” It took a year for VSG to get the import licences into China in the wake of the Chinese government’s crackdown on importers in May last year. Last year the company also launched a new business in Australia, My Cow, which exports entire cows to wealthy Chinese in the southern province of Guangdong that are slaughtered, stored in a secure freezer and the cuts provided to clients on demand. Chinese clients of My Cow, which is also backed by Melbourne’s Calvert-Jones family, are able to own their own cow in Australia and see the animal fed and managed until it is delivered. “Our view is that to access the Chinese market you need something different. That difference that we see is direct business to consumer,’’ Mr Edwards said. “From a Victor Smorgon Group point of view, we don’t want to be a commodity trader in China.’’ The move by VSG into infant formula pits it against a range of Australian firms that have gained approval to export to China, including Australia’s biggest dairy exporter Murray Goulburn and Australian Dairy Park, which is owned by Chinese investors. Dairy company a2 Milk also sells its products through the JD.com internet platform in China, while the Launceston ­infant formula and baby foodmaker Bellamy’s Australia has launched a Chinese version of its website and has grand plans for expansion. In November last year mining magnate Gina Rinehart also joined forces with Chinese industrial giant China National ­Machinery Industry Corporation in a $500m joint venture to export infant milk powder from Queensland to China. NSW dairy co-operative Norco is already supplying fresh milk into Chinese supermarkets. But Steve Lipshut, who co-founded NutraCare with his brother Mark, said the company’s product was the most competitively priced Australian infant formula offer in the Chinese ­market. “We have set up our own end-to-end operation. While we are introducing the most competitive priced Australian infant formula into the market in a highly disruptive way, it is the first step in a long-term plan to build a ­direct delivery online subscription model in China,’’ he said. The initial strategy is based on selling product to seven centres in China using Shanghai as a hub. “Our first catchment of 84 million people is next-day delivery from our Shanghai warehouse,’’ Mr Lipshut said. “Our goal is 20,000 families per centre over the medium term.’’ NutraCare is working on its Chinese strategy with the ASX-listed online marketing and website company Asia Pacific Digital, formerly known as Digital Performance Group, which is focused on the eCommerce sector in Asia. VSG has a stake in Asia Pacific Digital, which has about 60 staff in Shanghai as well as staff in Hong Kong and Kuala Lumpur. NutraCare is one of the first groups from Australia to sell product using Alipay.com, the Chinese third-party online payment platform. The group is now looking at setting up a crowdsourcing site through JD.com or the Alibaba-backed Tmall to replicate its strategy with My Cow. “Customers can buy a slice of their cow in Australia for their ­infant formula. Want it live by the beginning of August. There will be different levels of participation. 18 people will share the output of a cow,’’ Mr Lipshut said. VSG was the smaller conglomerate that emerged from the ­dismantling of the giant conglomerate Smorgon Consolidated Industries in 1995. VSG’s wholly and partly owned companies include fashion retailer General Pants Group, Tony’s Tuna and tomato grower D’VineRipe. It also has a significant property arm. VSG is also looking at expanding its Chinese business to consumer offering to other products such as tuna and vegetables. “Hopefully we can eventually do a weekly agricultural box product from Australia into Chinese homes,’’ Mr Edwards said. My Cow is also launching a variation of its offering called My Apartment in Australia, which will help My Cow customers buy apartments in capital cities. “We are trying to broaden it to My Life in Australia concept.’’