News: VLS Vita Life Sciences Posts HY Revenue of $20.1 Mln, page-5

I have a feeling that the jump in the share price today is probably related the 'tariff' issue.

Yesterday, the Trump administration implemented tariff increases on virtually everything entering the US from China.

The Chinese government had already drawn up a list of US imports that it would target with increased tariffs, in response to a comparable Chinese import tariff hit-list drawn up by the Trump administration back in July.

One US based supplement industry news website noted back in August that there was some concerns that the proposed list of tariff increases drawn up by China could adversely impact US based dietary supplement companies.

Now that Trump has gone ahead with the proposed tariff list, China has retaliated, slapping tariff increases ranging from 5-10% on the aforementioned list of items that had been proposed for a tariff increase.

The same report from the industry website mentioned previously noted that US health supplement companies had enjoyed some success in China, quoting the director of a US industry association, Scott Steinford-

Dietary supplements with a 'made in USA' positioning have been in demand in China. The first big winners in this development have been network marketing companies. Both Herbalife, which is the world's largest MLM devoted primarily to nutritional products, and USANA Health Sciences, have enjoyed large and growing sales in the Chinese market. Steinford said recently it appeared that other supplement companies could get in the fun in a big way, too.

"The MLMs were at first the primary way to enter the market" Steinford said. "But the system has been evolving to potentially be open to more of our products".

Herbalife apparently recorded US $868 million from sales in China in 2016, according to this article. The other US company mentioned above, USANA Health Sciences, saw US $301 million in net sales in the second quarter of 2018, with $242 million of that from Asia, and China in particular, according to a news article earlier this year from the industry website.

Another issue for the US dietary supplements industry is that 90% of the ingredients used in US manufactured products originate in China. So the tariffs issue could be a double whammy for companies such as Herbalife and USANA Health Sciences.

In short, both Chinese and US customers of these companies will probably have to pay more for products made by these companies, which could provide a significant competitive advantage for Australian companies such as Vita Life Sciences.