What Does HempFusion Entry onto China’s Ecommerce Giant, Tmall, Mean for Investors?

Published on: March 18, 2021
Author: Amy Liu

Hempfusion Wellness Inc. (TSX:CBD.U) announced today in a press release that it has launched products from its Probulin Probiotics subsidiary to the Chinese market through Tmall Global, China’s largest cross-border B2C online marketplace.  The company’s stock responded positively, closing 3.7% higher on March 18th.  While Tmall Global, an ecommerce platform run by Alibaba Group, is famous in China, North American investors may require some background to fully comprehend what the launch of Probulin in the Chinese market means for Hempfusion.

Hempfusion Enters China’s Probiotics Market

Hempfusion’s announcement on March 18th 2021 was well received by the market.  It was covered by notable small cap stock watchers like FinancialBuzz and Proactive Investors.

Key points that readers should note are:

  • Shipments are expected to begin early next week and available for purchase on Tmall on March 29, 2021.
  • The launch date is “directly ahead of one of China’s largest single day shopping extravaganzas, the mid-year 618 shopping festival, which shattered records last year with more than USD$98.52 billion in single day sales.”
  • “Tmall Global (“Tmall”) [is] the world’s largest cross border online marketplace reaching more than 750 million consumers in mainland China, Hong Kong, Macau and Taiwan.”
  • Jason Mitchell, N.D., HempFusion’s Co-Founder and CEO stated: “We believe Probulin to be the first American company to deliver cold and protected probiotic supplements direct to Chinese consumers,

What is Tmall and Tmall Global

For our North American readers, some context on Tmall would be helpful.  Whereas ecommerce exploded in the west because of COVID-19 lockdowns, in Asia, consumers have experienced over a decade of sustained growth in online shopping.

Tmall is part of Taobao, which is China’s number one online sales platform owned by Alibaba, whereras Tmall Global is a sub-platform of Tmall. Tmall positions itself to target high-end consumers in China and invites investments from overseas businesses.

Tmall serves over 500 million active internet users. A helpful comparison is to think of Tmall as an online version of Manhattan’s Fifth Avenue: a prestigious address focused on branded goods.

The brand has become a trusted platform for Chinese consumers to buy both international and home grown branded products, especially for  products that are not available in traditional retail outlets. In China having a Tmall shop is seen as a validation of your business. For big brands that want a presence in China and maybe a flagship store in the Tier 1 cities, but don’t need a store in every city, Tmall is their ideal entry point.

Tmall Global: Huge Potential for Hempfusion Investors

To fully understand the impact that Tmall Global can have for Hempfusion, we looked at Alibaba Group’s 2020 fiscal results. A couple of key highlights:

  • Tmall online physical goods GMV, excluding unpaid orders, grew 10% year-over-year, driven by growth of fast-moving consumer goods (“FMCG”)
  • Gross Merchandise Value transacted in the Alibaba Digital Economy(Taobao, Tmall, Juhuasuan) was RMB7,053 billion (US$1 trillion) for fiscal year 2020, which mainly included China retail marketplaces GMV of RMB6,589 billion (US$945 billion), as well as international retail marketplaces and local consumer services GMV.
  • Gross merchandise volume during Alibaba’s Singles Day, according to Alibaba, was $74.1 billion. This compares with $38 billion in a 24-hour period on 11.11 in 2019. Inc comparison, Amazon’s 2020 Prime Day on Oct. 13 – 14 garnered $10.4 billion in gross merchandise sales, according to Statista.
  • For 2020 Singles Day, American brands were the top international sellers to Chinese consumers, contributing $5.4 billion to the total. More than 250,000 brands participated this year, including 31,000 foreign brands.

International Health Brands Are Sought After by Chinese Consumers

As lifestyles for Chinese citizens change, their concerns have also changed: their health and well-being have become more important. Chinese consumers’ demand for healthcare products have increased for the past decade, especially among the elderly who want to stay in shape. Indeed, it is common to see Chinese returning from travel having brought food supplements or vitamins to the elderly in their family.  The sale of ampoules, vitamins or even protein powders and brewer’s yeast, for example, are booming on the Chinese market.

However, due to high profile food safety concerns in past years, the Chinese market still trusts international brands over locally produced products.

Will Hempfusion’s Probulin Probiotics do well in China?

Time can only tell if Probulin will succeed in China but investors should know that the initial products being launched on Tmall directly closely follow consumer trends in China. Tmall, as well, provides the brand with access to China’s wealthy consumer class and also,the cachet associated with the sales channel.

Keep an eye on NAI500 for continued coverage of Hempfusion and its activities in the China market.

Disclaimer: The company described in this article is a customer of NAI Interactive Ltd. This material is for informational purposes only and is not intended as a recommendation or offer or solicitation for the purchase or sale of any securities or financial instruments, or for transactions involving any financial instrument or trading strategy.

Hemp Life Science