By Bruce Einhorn From Bloomberg Businessweek

The country’s appetite for natural food has sent manuka honey sales skyrocketing.

Consumers in mainland China are demanding foreign brands that promise something many local products can’t: peace of mind. Worsening pollution and several product-safety scares have led to increased sales for imports that are considered safer, from baby formula and facial creams to fresh fruit and live seafood. “The fear of pollution is changing consumer spending,” says Shaun Rein, managing director of Shanghai-based China Market Research Group. “Anything that’s sort of natural is doing really well.”

Comvita is one beneficiary of the growing appetite for all-natural foods. The company, the biggest honey brand in New Zealand, relies on Chinese consumers clamoring for manuka honey for about 60 percent of its sales. People in China have long eaten honey to improve digestion and bolster their immune systems. Touted as a superfood for its antibacterial qualities, manuka honey is made by bees that pollinate the Leptospermum scoparium, a plant native to New Zealand and Australia.

On Tmall, the online marketplace owned by Chinese e-commerce company Alibaba, two 250-gram jars of Comvita’s manuka honey sell for 849 yuan ($127), more than nine times the price of a similar amount of the company’s clover honey. The brand is popular in cities such as Beijing and Shanghai but hasn’t yet caught on in less affluent cities, says Andrew Zhu, director of Auckland-based Trace Research, so there’s a lot of room for growth. On Sept. 5, Comvita announced a joint venture with a Chinese partner to distribute its honey on the mainland.

The company reported earnings of NZ$18.5 million ($13.7 million) on sales of NZ$231 million for the 15 months ended in June. That compares with profit of NZ$10.2 million and sales of NZ$153 million in the 12 months ended in March 2015. Still, Comvita says sales have suffered because of a slowdown in the Chinese economy, which is on track to grow about 6.7 percent this year, its weakest performance since 1990. The slowdown is putting pressure on the company to find new products.

Comvita is looking to take advantage of New Zealand’s reputation as an environmentally friendly country. Last September, it bought a 13 percent stake in SeaDragon, a New Zealand producer of fish oils. A plan to diversify into oils, berry products, and olive-leaf extracts for the supplements market will help Comvita double annual revenue, to NZ$400 million, by 2020, says Chief Executive Officer Scott Coulter. Sales of honey and other bee-related products will generate NZ$280 million; the other NZ$120 million will come from items like bilberry supplements (NZ$74.26 for 180 capsules) and olive-leaf extract oral spray (NZ$22.20 for 20 milliliters). Comvita says such products can help maintain healthy eyesight and cholesterol levels. “Our goal is to try to produce at the high-quality end of the market,” Coulter says. The strategy is “about connecting our customers to the source of their food.”

Meanwhile, demand for manuka honey has created an opening for counterfeiters, says Walker Zhong, CEO of Oceania Natural, a small Auckland-based Comvita rival. “There’s a lot of fake manuka honey because it’s so expensive,” he says. New Zealand’s Unique Manuka Factor Honey Association, which represents the country’s beekeepers and honey producers, is trying to trademark the name and preserve it for use by Kiwis only. Says association spokesman John Rawcliffe, “The consumer expects that if it’s manuka honey, then it comes from New Zealand.”

The bottom line: Comvita says honey products and new oils and extracts will help it double its revenue, to $290 million, by 2020,

IMAGE: Two jars of manuka honey sell for $127 on Alibaba’s Tmall.
Photograph: Andrew Musson for Bloomberg Businessweek

For more on this story go to: http://www.bloomberg.com/news/articles/2016-09-08/china-is-coping-with-pollution-by-buying-fancy-honey