‘Mini Proctor & Gamble’ says supermarket spending won’t stop

The latest cosmetics and household goods producer to make a tilt at the ASX reckons rising interest rates and inflation fears aren’t going to stop Australians from filling up their trolleys.

Hiro Brands, chaired by former Myer chairman Garry Hounsell, embarked on a $35 million initial public offer raise last week, offering shares at $1.87 each to bring its suite of cosmetics and cleaning products to the ASX.

Company managing director and CEO, Steven Chaur, is confident the consumer goods sector will remain buoyant, despite talk of tough economic conditions.

The price of food, rent, utilities and coffee have all gone up with Australia’s inflation expected to peak at an annual rate of 7.75 per cent in the December quarter.
The price of food, rent, utilities and coffee have all gone up with Australia’s inflation expected to peak at an annual rate of 7.75 per cent in the December quarter.Credit:iStock

“There is still a lot of consumer demand for everyday groceries. The business we compete in is everyday household goods and personal care products — consumers are still demanding those items,” Hiro Brands MD and CEO, Steven Chaur, told The Sydney Morning Herald and The Age.

Hiro brings together brands from unlisted consumer goods makers, Aware, which makes household products like Orange Power and Organic Choice and Heat Group, which makes brands including MUD cosmetics. These products generated $95.7 million in revenues in 2021, according to prospectus documents, and ran at a $16.1 million loss.

It is also pitching itself to the market as an opportunity to invest in local manufacturing, with the majority of its brands and ingredients being made in Australia.

But as the business hit the road to talk to prospective investors this month, there were no shortage of warnings about consumers’ ability to spend, with top-line inflation hitting 6.1 per cent.

Meanwhile, ASX-listed beauty brand BWX, which Hiro is pitted against in the market, was warning investors that prevailing retail conditions were exerting pressure on the company and its retail partners.

According to Chaur, Hiro is very different to a company to BWX. For one, the business is not just focused on cosmetics and beauty.

Hiro Brands chief executive Steven Chaur.
Hiro Brands chief executive Steven Chaur.

“We look at ourselves as being a mini Proctor & Gamble. The benefit is that we have a better ability to manage cyclical trends in the market.”

The business is also working to reduce its reliance on selling into the big two supermarkets — Coles and Woolworths sales represent only 30 per cent of Hiro’s business, Chaur said.

“We are fully diversified in the brands and retailers we are talking to… we service 4500 pharmacies through ‘direct to store’ delivery.”

The business is also banking on continued demand from Australian brands post-pandemic to have their products made onshore.

Aware Group already has contract manufacturing deals for local consumer brands like Thank You and Redwin at its Dandenong sites. Chaur says that despite rising manufacturing costs across the country, there will be more demand to use the company’s facilities.

“We’ve had a lot of enquiries since the pandemic and supply chain shortages from businesses looking to onshore again. The challenge for us is trying to meet that demand.”

Expectations around grocery spending have been bullish this week as analysts digest the impact that inflation will have on consumer staples revenues.

“If the shopper becomes more value conscious, which we believe is happening, we should begin to see a shift back to in-home consumption,” Jarden analysts said this week.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

Source: Thanks smh.com