Soap maker Pental hopes to clean up in China
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Pental, which makes laundry staples White King bleach and Softly wool wash, has developed a new range of Country Life bar soaps aimed directly at Chinese consumers, including goat’s milk soap with Australian tea tree oil, lavender and green tea.
Pental has also reached into the back of its cupboard and reformulated and repackaged soaps that have been in its portfolio for 20 years and are mainly sold in airport stores and souvenir shops. The rejigged Country Life range includes lanolin, tea tree oil and eucalyptus oil and features images of sheep, koalas and kangaroos.
Pental has secured distribution in leading Chinese supermarkets, pharmacies, airport stores and online outlets, including FTZmall.com, and plans to start manufacturing the new range at its plant in Shepparton next week.
“This is one of the most exciting projects for a long time,” said chief executive Charlie McLeish, who believes new product development and new markets are the key to drive top-line sales and margins in an increasingly competitive domestic market.
Aim to change track record
Mr McLeish is reluctant to issue forecasts, but expects to sell about 6 million bars of soap, worth $4 million, to Asian consumers in the first year, compared with current bar soap sales in Australia and New Zealand of about $10 million a year.
“We have a track record of over-promising and under-delivering – my goal is to ensure that we over-deliver on our targets,” Mr McLeish told Fairfax Media during an investor roadshow in Sydney this week.
“We’re riding on the confidence the Chinese retailers and Chinese consumers have in Australian-owned and Australian-made products.
“We have to make sure we live up to the reputation the dairy industry has created for other manufacturers in the Chinese market,” he said.
“We have to make sure we live up to the reputation the dairy industry has created for other manufacturers in the Chinese market,”
Pental also sees scope to sell other products such as White King bleach and White King stain remover into Asia and has had tentative discussions with distributors.
However, Mr McLeish has no plans to establish manufacturing operations in China to reduce costs and better compete with multinationals such as Colgate, Unilever and Cussons.
Point of difference
“Our point of difference is being Australian-owned and Australian-made and is around quality and culture – if we changed that state we would be no different to the other guys who manufacture in China,” he said.
Pental has invested about $400,000 on new soap packaging equipment to support its push into Asia. If sales take off, Pental is considering a larger capital expenditure program, which would enable it to make bar soap in new shapes, sizes and formats for the Asian and domestic markets.
Pental, which also makes Sunlight, Pears and Velvet soaps, and supplies private-label soap to Aldi and Woolworths, accounts for about 20 per cent of the Australian soap market.
After a near-death experience in 2012, when Pental (formerly known as Symex) was forced to sell assets to repay bank debt, the shares are now trading at their highest levels since 2007.
While sales slipped 0.7 per cent to $54 million in the six months ending December, underlying earnings before interest and tax rose 5.7 per cent to $3.1 million and net profit rose 12 per cent to $1.98 million, underpinned by cost savings.
Questions & Answers
Q.What is Pental's sales target for the new Country Life bar soap range in China during the first year?
What is Pental's sales target for the new Country Life bar soap range in China during the first year?
Pental expects to sell approximately 6 million bars of soap to Asian consumers in the first year, which would be worth around $4 million. This is compared to current bar soap sales of about $10 million annually in Australia and New Zealand.
Q.What specific product ingredients and packaging features are being used to appeal to Chinese consumers?
What specific product ingredients and packaging features are being used to appeal to Chinese consumers?
The Country Life range includes goat’s milk soap with Australian tea tree oil, lavender, green tea, lanolin, and eucalyptus oil. Packaging will feature images of iconic Australian animals such as sheep, koalas, and kangaroos.
Q.Why does Pental's CEO, Charlie McLeish, prefer not to establish manufacturing operations in China?
Why does Pental's CEO, Charlie McLeish, prefer not to establish manufacturing operations in China?
Mr McLeish believes Pental's main competitive advantage lies in being Australian-owned and Australian-made, linked to quality and culture. Manufacturing in China would remove this point of difference.
Q.What investment has Pental made to support its expansion into the Asian market?
What investment has Pental made to support its expansion into the Asian market?
Pental has invested approximately $400,000 in new soap packaging equipment specifically to support its push into Asia. Further capital expenditure may occur if sales are successful.
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