2020 was an extraordinary year for businesses worldwide and Vinda was no exception. Increased public hygiene awareness due to the COVID-19 pandemic led to a solid demand for wet tissues, kitchen towels and soft packs, and consumers continued to upgrade to high quality premium products. Nonetheless, this positive trend was not without its challenges, especially in a retail environment that was negatively affected overall.
In mainland China, which is our key revenue driver, the temporary lockdown in the early part of the year brought logistical disruptions that impacted our offline sales performance. However, due to the Group’s strong relationships with our business partners, Vinda was one of the first companies in the industry to efficiently resume operations after the lockdown and successfully supply sufficient hygiene products to meet growing market demands. Within mainland China, the coronavirus situation is now largely under control and the economy is recovering growth.
Most countries in Southeast Asia went into sudden lockdown in response to the epidemic threat. Although lockdown measures in North Asia¹ remained relatively modest, the tourism sector was inevitably affected. However, we were able to maintain a steady business performance in these markets even in the face of this challenging operating environment.
Despite the unprecedented economic disruption and extremely fierce market competition, Vinda stayed focused on its strategy of premiumization and innovation to successfully deliver an outstanding result in 2020. The Group significantly improved its profitability, driven by an enhanced product mix, continued low prices for wood pulp and strong growth in our e-commerce business. As a result, the Group’s operating profit rose by 56.3% to HK$2,453 million while net profit surged by 64.7% to HK$1,874 million. The gross margin increased by 6.7 percentage points from 31.0% in 2019 to 37.7% in 2020.
Vinda maintained its tissue market leadership in mainland China and China Hong Kong region ("Hong Kong")², with new premium tissue innovations launched in 2020 to strengthen our market leading positions. Our Tempo brand enjoyed stellar growth of more than 40% in mainland China, while other premium offerings such as Vinda 4D Deluxe and wet wipes achieved double-digit growth. Our premium portfolio³ contributed 30.6% of the Group’s total tissue revenue in 2020, up from 24.4% in 2019. In addition to a higher margin contribution, the focus on driving our premium portfolio delivers greater competitive resilience and helps mitigate the impact of potential raw material price fluctuations going forward. The consumer trend of upgrading to premium products, coupled with increased public attention to personal hygiene and health due to COVID-19, are additional factors that favor the sustainable growth of our premium portfolio.
PERSONAL CARE BUSINESS
Vinda’s feminine care business benefitted from product innovation and the successful launch of next-generation feminine hygiene products to deliver a strong performance in mainland China. This achievement was reflected in the rapid sales growth of the newly launched Libresse V-Comfort range of sanitary pads. The premium feminine care segment continues to grow faster than the total feminine care market, creating opportunities for the Group’s growth with premium products. Vinda also focused on product differentiation to further enhance its category competitiveness. In Malaysia, we continued to be the market leader⁴ in the feminine care business.
New pant innovations in the incontinence care business were well received in mainland China. The launch of the superior TENA ProSkin range – protective products that effectively keep the skin dry through fast absorption while promoting better skin health with breathable features – also performed well in the Chinese market. Moreover, Vinda continued to retain our market leading positions in Malaysia⁵ and Singapore⁶ by fully leveraging consumer insights and driving compelling brand activations. The Group is in a stronger position than ever to fully capitalize on the growth of aging populations in mainland China, Southeast Asia and North Asia.
The baby care business in Southeast Asia was another key revenue driver for Vinda within the personal care segment. Strong, integrated marketing activations, both online and offline, supported the rollout of new product innovations and continued to boost brand awareness and affinity. The launch of the new Skinature by Drypers range – open baby diapers that are gentle on even the most sensitive skin to keep babies protected from rashes and irritations – successfully attracted new, young parent consumers in the premium segment. In Malaysia, we continued to fortify our market leading position⁷ through quality product enhancements and differentiated marketing.
PRODUCTION CAPACITY EXPANSION IN MAINLAND CHINA AND EFFICIENCY ENHANCEMENT PROJECT IN SOUTHEAST ASIA
In 2020, Vinda’s total annual tissue paper production capacity remained at 1,250,000 tonnes. We expanded the production capacity of wet wipes in southern and northern China, and target to complete our tissue production capacity expansion in southern, eastern and central China in 2021.
In Southeast Asia, progress on the construction of Vinda’s regional headquarters in Malaysia is on track. This project will allow us to consolidate all our regional operations under one roof. The first phase is expected to be completed in 2021, when new warehousing facilities will become operational. The second phase of construction will focus on manufacturing facilities and our innovation center. This new regional hub will improve our overall operational efficiency while also supporting long term business development in emerging markets.
STRONG E-COMMERCE BUSINESS
Vinda has long been a leading player in online sales channels, with well-established relationships across major e-commerce platforms, unique set of digital capabilities and robust supply chain management. The continuous shift of consumers from traditional to digital channels has further accelerated our competitive advantage in e-commerce: online sales contributions for the Group expanded to 36% of total sales in 2020, up from 29% in 2019. The importance of e-commerce sales continues to grow in mainland China, which contributed 46% of total sales in 2020, up 9 percentage points compared to 2019.
RECOGNITION FOR OUR COMMITMENT TO SUSTAINABLE DEVELOPMENT
During the year under review, Vinda became the first company in Asia to utilize Standard Chartered Bank’s loan facility to address the unique challenges of the COVID-19 pandemic. The Group used this financing to establish manufacturing lines for the production of disposable face masks at existing Vinda factories in Zhejiang and Guangdong provinces. Vinda was also the first Fast Moving Consumer Goods (FMCG) company in Hong Kong to secure a green loan in accordance with the Green Finance Pre-Issuance Stage Certificate issued by the Hong Kong Quality Assurance Agency (HKQAA). In further recognition of our commitment to environmental protection and sustainable development, Vinda was named Outstanding Green Loan Recipient for the largest single green loan awarded in the FMCG industry at the HKQAA’s Hong Kong Sustainable Finance Awards 2020.
In addition, Vinda received the Gold Award in the Environmental, Social and Governance (ESG) Corporate Awards 2020 organized by the internationally renowned financial magazine, The Asset. This award recognizes the Group’s outstanding performance in areas of corporate governance, social responsibility and environmental protection.
In Malaysia, Vinda was the national winner for the United Nations (UN) Women 2020 Malaysia Women’s Empowerment Principles (WEPs) Awards in the Gender-Responsive Marketplace category. This prestigious award recognizes the Group for its efforts in empowering women in the marketplace and community through impactful communication and taboo-breaking activations via our Libresse feminine care brand.
The COVID-19 pandemic in mainland China has been largely controlled, the Chinese economy has shown stable growth post pandemic and it is expected that a steady local demand recovery will continue into 2021. Despite regional economy is expected to continue to recover, certain risks remain. The development of COVID-19 pandemic in the region, possible further lock-downs, geopolitical volatilities, possibility of rise of raw material prices, and exchange rate fluctuations of the Chinese Yuan, remain near-term uncertainties for Vinda’s operating environment.
Although competition is expected to remain fierce across the hygiene products market in general, Vinda is confident that through its adoption of effective strategies to drive growth through premiumization, innovation and excellence in sales execution, the Group will continue to consolidate and build on its market leading position in the tissue segment while also driving growth in the personal care segment.
Leveraging our numerous strengths – such as our well-loved premium product brands, compelling marketing executions, well-established distribution channels and our strong position as a leading player on e-commerce platforms – will allow us to capture growth opportunities across premium segments in our tissue and personal care businesses, as well as in online retail channels.
All of us at Vinda are committed to contributing our strongest efforts and fulfilling our ambition of becoming the leading hygiene products company across Asia.
Remarks1 North Asia includes HKSAR, China Taiwan region ("Taiwan") and South Korea
2 Source: Kantar Worldpanel, sales value year-to-date at 4 December 2020 & Nielsen, sales value full year 2020
3 Premium portfolio (Tempo, Vinda Deluxe, Tork and wet wipes)
4 Source: Kantar Worldpanel, sales value year-to-date at 6 December 2020
5 Source: Internal estimates, sales value, year-to-date at 30 November 2020
6 Source: Internal estimates, sales value full year 2020
7 Source: Kantar Worldpanel, sales value year-to-date at 6 December 2020