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’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:
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.
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:
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.
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.
