But Blackmore is not leaving anything to chance. He is using private hospitals operator Ramsay Health Care as his model, learning from the experience of his friend, the company’s founder. Ramsay, who died in 2014 aged 78, established the Paul Ramsay Foundation prior to his death. It holds a 32 per cent or $3.5 billion stake in the group, which is administered by trustees. The annual flow of dividends is distributed to a range of causes. While it doesn’t make Ramsay takeover-proof, there is a degree of difficulty and complexity involved that makes potential predators think twice.
“I knew Paul Ramsay very well,” Blackmore says. “That was a bit of an inspiration for me.”
The Ramsay Foundation structure is an ideal model for Blackmores, one of the glamour stocks of the past few years. Blackmores soared to a record share price of $220 in January 2016 on unprecedented demand from Chinese consumers before falling back as the Chinese vitamins frenzy calmed to more sustainable, albeit still robust, levels. The share price is now about $124.
Blackmore is still on the board despite stepping back from the chairman’s role early last year. He is the son of founder Maurice Blackmore, a pioneer naturopath who established Blackmores in 1932. Marcus Blackmore, who took the helm of the company in 1975 – two years before his father died – has played a central role in building the group up to a genuine powerhouse with annual revenues of $600 million and production of 4.5 billion tablets and capsules each year.
Eye on the future
At a time when several major rivals have been bought out by Chinese companies, he has a clear eye on the future and a keen preference for Blackmores to remain an independent, ASX-listed entity with Australian owners. “We’re about the last one standing,” he says.
The soaring appetite, from 2014, of Chinese consumers for big-brand Australian vitamins stemmed from their “clean and green”, high-quality reputation and has resulted in a string of buyouts, including of the Swisse Wellness business in late 2015. Chinese company Biostime International, which subsequently changed its name to Health and Happiness, paid $1.7 billion for Swisse in a two-step acquisition.
In late 2016, ASX-listed Vitaco was bought for $314 million by Shanghai Pharmaceuticals and Chinese private equity firm Primavera Capital.
China’s JIC Investment and Tamar Alliance Fund in April this year bought a majority stake in Australia’s No.3 vitamins player Nature’s Care, which owns the Healthy Care brand stocked in Chemist Warehouse. Sydney’s Wu family retains a significant stake in the company, which was said be sources to be valued at almost $800 million after the investment.
For Blackmores, Marcus Blackmore believes a trust run by a capable set of trustees according to his wishes is the ideal set-up. “That will suit it very well. It is the business of the future,” he says. “I’d like to set it up so it keeps running.”
While the corporate defence aspect is central to the trust, he also wants to ensure there is a significant philanthropic strand. Late last month he donated $10 million to Southern Cross University in NSW to establish a centre for naturopathic medicine, a move that drew some of the usual critics of vitamins and their worth out of the woodwork. “This is the Australian tall poppy mentality coming out, that wouldn’t happen in the United States,” says Blackmore. Philanthropy, he says, is much more advanced in the US – a “cultural thing”.
Blackmore idolised his father, Maurice, whom he says confessed to him on his deathbed that a major regret was not pushing harder to ensure naturopathy was viewed as a profession. Although the plans aren’t fully set in stone, the Blackmore trust’s philanthropic push would have a broad aim of advancing scientific research into vitamins and health supplements. He also has a special interest in research into Alzheimer’s disease and is perplexed by its rising incidence. The Ramsay Foundation funds a variety of programs in the prevention of chronic disease, and in helping the disadvantaged through education.
Investment bankers sniffing
Over the years there have been countless calls from investment bankers seeking to prise away his stake. “There’s plenty of them come sniffing at the door,” he says.
That was the case even before the China boom. He recalls the late Ed Tweddell, who was the chief executive of ASX-listed pharmaceutical group F.H.Faulding, coming to him with a serious offer in the 1990s – but which was rejected as way too cheap at $2 per share, and almost insulting. Blackmore, however, acknowledges that if a knockout offer were to come now from an outsider, under corporate law the board would have to seriously consider it, albeit begrudgingly.
While the sharemarket meltdown since the start of October has stripped billions from the market capitalisations of blue-chip companies – and dented the Blackmores share price – Blackmore says he is unperturbed. He is adamant the long-term value will go higher, with health and wellbeing a major focus among consumers around the world.
Since the heady days of early 2016, when the Blackmores share price rose to $220, he has watched about $400 million stripped from his wealth on paper. “As you get older the accumulation of money becomes less important. The money’s not the driver,” Blackmore says.
Still, having 4 million shares delivers some handsome dividends. The full-year payout for 2017-18 for all shareholders was $3.05. That’s $12 million in dividends for the 23 per cent stakeholder. That leaves plenty for one of his passions, with Blackmore a keen yachtsman. “There’s not a boating magazine printed anywhere in the world that I don’t read,” he says.
He also enjoys walking on Sydney’s Bilgola Beach with his wife, Caroline, and his two dogs. His own vitamins and supplements intake is impressive, but he quips that he doesn’t have to pay full price for them so he may go slightly overboard.
He takes about 20 vitamin, mineral and herb supplements each day.
A tackle box a day
“I have a fishing tackle box with all of them in,” he says. The suite of capsules and tablets includes fish oil, garlic, vitamin B complex, turmeric and DHA.
But he still thrives on the corporate life. He generally heads in to the Blackmores head office, in Warriewood on Sydney’s northern beaches, at about 10am. “Most nights I’m there until six or seven,” he says. “It’s a way of life. It’s not a job for me.”
Staying mentally sharp and maintaining good physical health is central to Blackmore’s outlook.
He is also bemused by critics of the vitamins and supplements industry, and says if people weren’t convinced they were helping their own wellbeing, the industry would have shrunk a long time ago. Essentially, consumers are voting with their feet.
“If they didn’t think they were getting a benefit they wouldn’t hang around,” he says. “It’s that consumer-driven thing.”
The cycles of life have also brought some fresh truths to Marcus Blackmore. He says his father was an extremely hard worker, and young Marcus vowed that he wouldn’t spend so much time at the coalface. But the apple never falls far from the tree.
“When you’re young you say, ‘I’m not going to be working my guts out like he did’. But I think I worked just as hard as he did. For me the exact same thing happened,” he says.
Through the roof
Blackmore marvels at how fast China demand took off in 2014 and 2015. The hard-won “clean and green” reputation of Australian producers was in the spotlight just as a series of contamination scandals involving Chinese-based infant formula producers undermined confidence in the processes used by Chinese firms.
Blackmore was stunned as the company made a $100 million net profit after tax in 2015-16. Just two years earlier the annual profit was $25 million.
“It went through the bloody roof. You’ve got to look on that year as a gift. It was luck,” he says. “We milked it, I’m sure, a lot better than a lot of others.”
He says being publicly listed can be a curse; investors just want to see 10 per cent growth the following year, even if there are clear explanations for a one-off spike. “The market doesn’t give two hoots about whether it’s luck or not,” he says.
Blackmores chief executive Richard Henfrey, who took over from Christine Holgate in 2017, is trying to bring more consistency to the business and take out some of the volatility that makes supply-chain planning difficult.
Blackmore is also ambivalent about the quarterly reporting the company undertakes – with much more transparency than most consumer goods companies that stick to half-year and annual reporting.
“I’m not sure that’s the smartest thing in the world,” he says.
Blackmores joined the ASX in 1985, somewhat reluctantly. “It wasn’t that easy to get finance,” he says.
He tested the waters in the lead-up by buying shares in wine company Lindemans to get a better feel for what he was embarking on.
“I actually did my shirt a bit,” he says. “I thought the stock exchange looked like Randwick racecourse.”
With more than 30 years’ hindsight, Blackmore says in retrospect it is easier to build a company under private ownership. “Would you go public now, I’d say no. All of a sudden your backside is exposed.”
He also believes corporate Australia might be losing its entrepreneurial zip, as corporate regulations tighten and “box-ticking” seems to take precedent. “Boards are too risk-averse,” he says.