Comvita & the China Brick Road

In the film the Wizard of Oz, Dorothy walks a yellow brick road to the Emerald Castle in search of a wizard. In China, Comvita appears to have embarked upon a kindred quest to the cave of a dragon. Although both reach their destination, neither wizard nor dragon deliver on the hopes held for them, and Comvita learns that dragons do not live forever. Bruce Roscoe traces Comvita’s China sojourn, compiles a damage report, and asks, where to now?

By Bruce Roscoe

China appears to be unravelling as Comvita’s largest — and New Zealand’s second-largest — market for mānuka honey and related products. Demons can be seen pulling on threads from opposing directions, reducing the garments of the world’s largest mānuka honey producer to gardening wear. 

Cartoon generated by ChatGPT.

The big picture is daunting. Consumer confidence is ebbing. Families, anxious over future security, are saving rather than spending. Moreover, efforts to stimulate consumption “often overlook deeper structural issues, including the prolonged real estate crisis…”, according to analysis published by East Asia Forum in August.

China is “trapped in a cycle of deflation”, Geopolitical Intelligence Services stated in a January report. “Recent economic indicators suggest that the country’s economy is likely to stay stuck in a deflationary cycle for another two years”. Deflation persisted amid consumer demand weakness.

On the street and online, structural changes are afoot. “As new consumers want value for money more than ever, the channel structure has changed, giving rise to new … membership and discount-based models” for the food and beverage industry, states KPMG Advisory (China) in a September report. In a section noting buzzwords that are taking hold among consumers, the report ominously includes “downmarket”.

“China now is somewhere around the status of a Brazil — big, important but difficult,” CNN has quoted Anne Stevenson-Yang, co-founder of J Capital Research, as having said. “The economy is not reverting to the poverty levels of the 1980s, but there is a lot of dialling back being done.”

Such sea changes have contributed to plunging Comvita’s China (including Hong Kong) sales NZD31.8m from the NZD109.0m achieved in the 2023 peak year to NZ77.2m for the June 2025 year. In its latest annual report, Comvita resolves to address China “legacy challenges around ageing inventory and distributor management”.

Stress Fractures in the Foundation

Although Comvita turned 50 years old in 2024, it launched itself on the world stage in earnest at age 30, when it shed parochialism and announced itself as a brand of global aspiration by changing its name to Comvita Ltd from Comvita New Zealand Ltd. Sales had topped NZD20m the year before, and within 20 years would exceed NZD200m.

“First sales into new Chinese market” was ranked sixth in the list of “performance highlights”, below “Comvita Japan records maiden profit of $49,000” in Comvita’s annual report for the December 2005 year. Comvita had located its “Comvita Asia Ltd” subsidiary in Hong Kong. This subsidiary was first incorporated in New Zealand and, as though Comvita viewed the world through a colonial looking glass, was entered directly under United Kingdom on the company directory page of the annual report. China was unnoted, yet in the city of Shenzhen that borders Hong Kong to the south on the east bank of the Pearl River, a partnership was forming that would become Comvita’s locomotive of growth.

In Shenzhen in 2004, Guangping Zhu established Shenzhen Comvita Natural Food Co. Ltd. From this base he, his wife Li Wang, and office manager Li Sun trailblazed Comvita’s distribution in China. Comvita acquired 51% of their company in July 2017, renamed it Comvita Food (China) Ltd, and added a Hong Kong unit, which it incorporated as Comvita China Ltd (and in various reports casually abbreviates both companies to “Comvita China”). In a perpetual confusion, Comvita HK Ltd remains as a discrete entity.

Swayed by the NZD40.0m in sales and NZD8.6m in pretax profits that “Comvita China” chalked up in the June 2018 year, Comvita moved to acquire the remaining 49% of the venture in June 2018.

Comvita had paid for the acquisition by issuing its own shares in two tranches — 2.83m shares (approx. value NZD16.4m) and 4.05m shares (NZD12.3m). The implied share prices were NZD5.80 and NZD3.40. The cash component that Comvita paid was only NZD3.19m. The shares were issued to the owners and principals of Shenzhen Comvita Natural Food Co. Ltd — Guangping Zhu (who owned 80%) and Li Sun (20%). Mr Zhu’s majority portion was assigned to Ms Wang, who through earlier purchases of Comvita shares had first appeared on the company’s top-20 shareholder list in April 2011 with a holding of 500,000 shares or 1.7% of the company.

Ms Wang built up her holding to 2.8 million shares or 6.3% of Comvita. After Comvita acquired the company her husband had founded in Shenzhen, Ms Wang’s holding climbed to 8.3m shares, elevating her to largest shareholder with a stake of 16.8%. She remained largest shareholder as at 30 June 2025, though her holding had been diluted to 12.1% as a result of new share issues by Comvita. Ms Sun at that date held 1.41 million shares (2.0%).         

After things went south up north, Comvita began a “review of distribution arrangements” as part of a “China reset”, according to the company’s 2025 year annual report. Soon after, in response to attempts by Comvita co-founder Alan Bougen and former chair Neil Craig to scupper the proposed takeover by Florenz Ltd for NZc 80 per share, Ms Wang conducted her own review.

In a statement released 10 November, Ms Wang declared: “We do not believe the current management team can turn around the company’s performance”. This was an extraordinary rebuke from an insider who had pretty much seen it all, through thick and thin. “The business falling into the hands of receivers is a distinct possibility, particularly if the business in China does not rapidly improve”, Ms Wang warned. Comvita announced on 18 November that Mr Zhu was ending his six-year tenure as a director.

Where to Now?

Comvita, a pioneer in China, also spearheaded discount selling in the US. As the central plank in an effort to lessen dependence on the China market, Comvita began wholesaling mānuka honey to the buyers’ club discount chain Costco Wholesale Corp. in early 2018. The rollout was to 200 warehouses throughout the US and Canada. Typically at Costco, pallets are forklifted to a warehouse floor. Pallet and cartoon design enables shoppers to remove a jar directly from a carton. Less than a dollar-a-can peaches or tomatoes or other cut-price commodity are likely seen on a side-opened pallet alongside the discounted mānuka. A Comvita management insider told this writer he was talked down when he opposed the diversification as brand-damaging.

Other mānuka honey packers, similarly flush with inventory, followed Comvita’s lead by pushing into so-called big-box US retail chains on lantern paper-thin margins. Retail-pack mono-floral mānuka honey was exported to the US at NZD43.48 per kilogram in CY2024, 21.9% less than the average NZD55.70 for exports in the same category to China (including Hong Kong).

The year after Comvita took on board Shenzhen Comvita Natural Food Co., China accounted for 15.7% of total sales (June 2019 year: NZD26.9m of NZD178.5m). That weighting grew to 46.5% in the June 2023 peak China year (NZD109.0m of NZD234.2m). The 2024- and 2025-year weightings were 43.0% and 40.1%. Actual dependency may be as high as 60.0%, Comvita believes, when Chinese travellers and Chinese residents of the broader Asian region are included.

If Comvita, which by volume accounts for about half the mānuka honey industry, becomes marginalized in China, still New Zealand’s second-largest market for retail-pack monofloral mānuka honey, the damage is likely to travel underwater like a tsunami to engulf other markets, which would fill with large volumes at fire-sale prices to clear inventory. Destabilisation and further commoditisation would result.  

Or China may increase imports of bulk monofloral mānuka honey for packing under Chinese brands. It has already developed a taste for bulk mānuka, as indicated in the table in this report. And it seems to have learned that not much needs to be paid for it (NZD25.21/kg in CY2025 1Q-3Q, down 37.8% from the CY2024 same-period price of NZD40.56/kg).  

All That Glitters

A lion, scarecrow, and tin man accompany Dorothy on her journey along the yellow brick road to the Emerald Castle. Witches — one to the east, another to the west — are in the fray. Readers may enjoy assigning these characters to real-life figures in the mānuka honey industry.

But the book upon which the musical fantasy film is only loosely based, L. Frank Baum’s The Wonderful Wizard of Oz, is authoritatively interpreted as an allegory that illuminates the late 1800s’ argument in the US that the gold standard oppressed the poor. In this view, the yellow of the brick road is a metaphor for gold. The yellow of Comvita’s China road perhaps turns more the Shakespearean glitter seen in Venice.

Word plays aside, a reconsidered future for mānuka honey in China stands hope on its head. As home to a centuries-old tradition of herbal medicine and the world’s largest honey producer, China should perhaps be the most receptive of all markets to mānuka honey. The falling away of this market after such a quick-fire ascent may signal that the purported benefits of the honey have not lived up to their billing. Rather than having been misunderstood in terms of efficacy against certain health conditions, the present danger may be that mānuka honey in China has been understood.

Great store had been placed in China as a valued market for mānuka honey even by the Ministry for Primary Industries, which supplied a letter in support of the Manuka Honey Appellation Society’s applications in China for a certification trademark for the words “manuka honey”. Rejection of the first application, filed in February 2016, was unsuccessfully appealed to the Beijing Higher People’s Court. In sum, NZD506,893 was spent on the China effort, the second highest country total after the NZD637,643 spent on the trademark case in the UK, according to MHAS accounts.

Superstition & Mortality

Twelve creatures represent the years in the cyclical Chinese zodiac. Only the dragon among them is unreal.

The superstitious among us may pause to consider that Comvita returned its most traumatic losses ever following the close in early 2025 of the Year of the Dragon, which gave way to the Year of the Snake.

Chinese dragons, unlike their mythical counterparts in other lands, are regal with deep associations to emperors past. They are harbingers of good fortune. Like wizards, they are endowed with magical powers. But the wizard in the Emerald Castle was shown to be human, and the dragon at whose feet Comvita bowed in China is revealing equal mortality.

Bruce Roscoe is a Japan-resident researcher and former foreign correspondent and securities analyst.