Planet Health’s pick me up
Friday, 11 July 2008
Last Updated: Friday, 11 July 2008
By James Thomson
Peter Harwood’s decision to move his business to regional NSW helped transform the company into a market leader. Now he’s got a new plan to grow sales and market share by taking advantage of the turmoil created by the downturn.
The town of Bowral in the New South Wales Southern Highlands is best known for its ties to the Bradman cricketing legend. But it is fast becoming known as the home of pharmaceutical and nutritional supplement company Planet Health, which moved to the town in 1999 and has since become a $20 million business with some of Australia’s most popular health brands.
Founder Peter Harwood has plans to grow the company’s revenue to $50 million over the next five years. But first he has to beat the downturn that is already buffeting the pharmaceuticals sector.
Harwood and his wife Mandy founded Planet Health in 1996 after working in the pharmaceuticals industry since the 1980s and running an antiques business on the side.
But in 1999, Planet Health hit a snag after the manufacturer of their number one selling brand Efamol announced it was taking distribution in-house. In an instant, 63% of Planet Health’s sales were gone.
The Harwoods were devastated, and set off on holiday to regroup. One rainy afternoon they were in a café in Bowral when the antique lovers spotted an art deco place they loved. They called the agent and went and had a look at the place, and loved it. But there was a catch – the estate agent told them they would struggle to find a suitable warehouse for the business.
That was when fate intervened. “We left the house and within two minutes we found a warehouse that was just perfect for us. It was twice the size of our Sydney warehouse for the same rent,” Peter Harwood says. After doing some more research and learning that Bowral was well connected from a freight point of view, they took the plunge.
Harwood says the biggest problem with re-establishing the business in a regional area was finding people, as not all of the Sydney staff were prepared to relocate. But he soon found the while the number of job applications he received were not as great as they might have been in Sydney, the quality of candidates was actually better. ‘There is a group of highly-qualified people who have moved from the city and are very keen to work for a national or international company,” he says.
The key to rebuilding the business after the loss of the Efamol brand was refocusing on two existing brands in the Planet Health stable: Lifestream (a New Zealand-based nutritional supplements company which sells “super foods” such a spirulina) and The Purist Company (which makes hair care, skin and body care products). The company has since added a number of other brands (including, ironically, Efamol) and also created its own brand of beauty products called Qsilica.
Planet Health’s growth since 1999 has been greatly helped by a rise in the consumer’s appetite for health, beauty and wellness products. But this industry growth has created some challenges.
Government scrutiny of the sector has increased sharply. Not only is the ingredients of every product closely scrutinised, but every advertising campaign needs to be checked by a government body to make sure Planet Health can prove the claims it makes about its products’ benefits. “We now have a full-time regulatory affairs person,” Harwood says. “A few years ago you would have got a consultant in for a few hours a week if you were lucky.”
The other problem created by the growth of the industry is the wave of competitors entering the sector, and competing largely on price. Harwood says this has made it harder to win market share and grow sales. Revenue growth in the last 12 months has been flat, and he expects the consumer slowdown will also hurt the sector in the coming year.
In order to prepare for the downturn, Planet Health has trimmed its product range from eight brands to five, concentrating on those products that have “a bit of substance behind them” in the form of proven science or a strong ethics, and a good story that can help with the marketing push.
Harwood says he has also focused on premium products which generally sell at the top end of their category. Not only do these products attract higher margins, but Harwood believes they will also attract customers who will keep buying regardless of the economic cycle.
But Harwood does not believe some of his rivals will weather the tougher economic times as well as Plant Health. “There’s been a flood of new brands in the last few years. That’s OK when the market is booming and the pie is growing, but a lot of those are really focused on price and they tend to price themselves out of the market. We’re already starting to hear that some of the brands are struggling.”
As rivals exit the sector, Harwood expects to pick up market share and sales. “I’m confident in our growth forecasts. We see the tougher economic climate as an opportunity for growth.”
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