Blackmores Limited and Bega Cheese Ltd target more growth in China

Credit: Jonathan

Not too long ago many Chinese believed that McDonalds represented the best of Western food, however, the fast-growing love of organic health foods shows how times have changed and the trend towards dairy is one that several Australian companies are now cashing in on.

Moreover, The Australian newspaper is today reporting that Bega Cheese Ltd (ASX: BGA) and Blackmores Limited (ASX: BLK) are planning to launch new health food products into the huge Chinese consumer market.

Both businesses have achieved success supplying baby formula or vitamin products into China and according to The Australian, China’s ageing population may now be targeted with new health food products.

Branding, advertising and targeted marketing are critical to the success of businesses like Blackmores, while the ageing population is an obvious new target market when searching for different growth avenues.

Bega’s wholly owned subsidiary Tartura already supplies organic baby formula products to Blackmores and Bellamy’s Australia Ltd (ASX: BAL), with the shares of all three companies rocketing over the course of the past year.

In February, Blackmores lifted its interim profit 160%, while Bellamy’s lifted its interim profit 325%, with both businesses continuing to grow Chinese sales at torrid rates.

Blackmores’ desire to source more dairy products from Bega reflects the fact that the growth stories for companies with leverage to the fast-growing Chinese middle class may be only just beginning and investors should keep the shares at the top of their watch lists.

Today, Blackmores shares sell for $170.36 on around 29x analysts’ estimates for around $5.90 in earnings per share for the full financial year.

This looks a reasonable entry point for investors prepared to take on a high degree of risk in search of potentially high returns.

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Motley Fool contributor Tom Richardson owns shares of Bellamy's Australia.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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