Good morning, ladies and gentlemen. Welcome to the 2020 Interim Results Presentation for Health and Happiness International Holdings Limited. Joining us today is Mr. Luo Fei, Chairman; Ms. Laetitia Garnier, Chief Executive Officer; Mr. Jason Wang, Chief Financial Officer; and Ms. Joy Tsai, Investor Relations Director. Kindly note that this webcast is audio only and there is no video. During today's presentation, Mr. Luo will first give some opening remarks, after which Ms. Garnier will present the group's business review and outlook for the rest of 2020. Following this, Mr. Wang will present the group's financial review for the interim period. The management will then take questions after the presentation. However, at any time, you may submit a question by text by clicking the question mark symbol on the left side of the webcast panel. Kindly submit all questions in English.
Once again, you may submit a question at any time, in English only, by clicking the question mark symbol on the left side of the webcast panel. I will now pass it over to Mr. Luo Fei for his opening remarks. Mr. Luo, please.
Good morning, everyone. Welcome to H&H Group's 2020 H1 Results Briefing. 2020 has so far been a very unpredictable year. Meeting each other through the conference call instead of face-to-face has become the new norm. In this environment, our business model has still proven to be adaptable and agile, which has helped us to go through the global COVID-19 pandemic and proactively respond to changing consumer behaviors, leading us to adapt new ways to market our products and interact with our consumers. In the first half of 2020, we still achieved healthy revenue and adjusted net profit growth. Although this is not a high revenue growth result, we still see a lot of opportunity to grow going forward. I will highlight four points as follows.
Number one, during the global pandemic, we see a big opportunity from the increase in demand of our immunity-related supplements across both ANC and BNC. We see an accelerating trend of online purchase, which has translated into our robust growth of our online sales across the business in China and globally. Number three, we see further room to growth in the offline sales space, which remains a critical part of our business. Despite the pressures faced in the first half of this year, we continue to expand our distribution and penetration in China, ANZ, and other new markets to make our products and our brands more reasonable and available to consumers. Number four, at the same time, the market segmentation trend is continuing and is creating several fast-growth new categories, including, for example, goat infant formula, infant nutrition supplement, and beauty from within supplements.
In the first half of this year, through achieving a profitable growth, we have also been able to maintain a high cash conversion and reduce our net debt leverage. As a result, we have decided to pay an interim dividend 50% of the net profit. Now, I will pass it over to our CEO, Laetitia Garnier, for the detail. Thank you.
Thank you, Fei, good morning or good evening to you all over the phone. Thank you for joining the presentation today. The first half of this year has indeed been very unpredictable on many fronts. I think you see through our results that the business has responded proactively to all these changes. Our proactivity during the initial outbreak at the beginning of the year and what has become a global pandemic throughout the second quarter shows our ability to respond to the change in consumer needs and of our consumers and our customers. Importantly, we've been able to also enable supply continuity for our business through the first half, which we think is a good performance. You will appreciate as part of our ability to embrace change, that we have changed the way we report to you and also the way our presentation looks like.
I'm going to refer going forward to the presentation that I hope you have in front of you. We've tried to make information as clear and transparent as possible, also providing you with what we think are the latest consumer trends that we need to embrace to be able to capture growth going forward. I am now referring to page four of the presentation, giving you some highlights of our financial performance. We have achieved profitable growth in the first half of this year, despite COVID-19 challenges. Our first half revenue has been 2.6% year-over-year, like-for-like, with an adjusted net profit up by 8.9% on a like-for-like basis again.
Which means that, as Fei mentioned, this is not a high growth, but we still have been able to grow in the first half of the year and more importantly, to deliver high single-digit net profitability growth just by spending more smartly, adapting the way we go to our consumers, the way we trade with our partners, and improving our efficiency. This 8.9% adjusted net profit growth is, I think, the reflection of us operating more efficiently as a business while still being able to deliver top-line growth. I think it's important to highlight as a second point that we have seen double-digit growth in the China market, which is our core business, with 12.8% year-on-year on a like-for-like basis, with China now accounting for 82.6% of our total group.
Important to highlight that our immunity focus ranges both across BNC, Baby Nutrition and Care, and ANC, Adult Nutrition and Care, have grown really fastly over the first half of the year, of course, as a result of the pandemic, but also as a result of our ability as a company to have the right proposition for consumers. As a result, 45.4% increase for immunity-related products for BNC and 48.5% for ANC, respectively. Our IMF revenue in China has come down at -3.5% due to a slower offline traffic, but at the same time, our online revenue has grown by 32.8%, which we think is an important performance in light of the digitalization of sales in the China market and globally. Now online sales in China are accounting for 15.5% of our total IMF sale, which is a big uplift versus what was last year, 11.3%.
Important also to mention that our Swisse China revenue has grown 27.9%, which demonstrates our ability five years after the Swisse acquisition to be able to move actively into the Chinese market and to activate the brand into China, and still five years later, to deliver strong double-digit growth in the China market for Swisse. From a financial perspective, because of these results and the way we operate as a business model, we have been delivering strong operating cash flow with an increase of 24.5%, which I think is an important performance to highlight, because in terms where a lot of things are being disrupted in the market, we're still able to keep high cash flow generation and high cash balance, which Jason will highlight later, which puts us in a strong position to continue to invest for the future and have a healthy financial balance sheet.
At the same time, we've been able to continue to deleverage our balance sheet with a net leverage ratio down to 1.38 times. As Luo Fei just mentioned, in order to reward our shareholders and in light of this strong cash performance, we have decided to pay an interim dividend of 50% of our net profit for the first half of this year. On the next page five, we have given you a bit of a snapshot on the largest challenges we have faced from our business perspective in the first half of this year, and also the main growth drivers of the business.
The two challenges that we'd like to call out first is the offline traffic down for IMF industry in China, particularly in the second part of this first half, second quarter, which has not fully recovered and as a result has impacted our IMF sales in the China market. The second one is related to our Australian market, which is down in the first half of the year because of the pressure we have faced from the Daigou-related channels. Those are the two main challenges. We'll come back to them. At the same time, we have seen positive growth signals and drivers for the business. The first one, a sharp increase in immunity-related demand from consumers. Second one, online sales and digitalization of communication with consumer, which has translated into an increase of our online sales in China and other markets.
The third one is the increasing demand for fast-growing new categories that we will speak about later. The last one is an operational data, but important, that we have been able, throughout the first half of the year, to ensure continuity in our operations to be able to get products to consumer, to the market, and manage also our cost of goods. The next 3 pages are a quick snapshot on consumer trends, emerging consumer trends that we have been foreseeing for some time but have really materialized and accelerated in the first half of this year, and that we think are bringing new opportunities for the business. The first one is consumers becoming more health-cautious. The next one on page 7 is consumers becoming more digital, both from a purchase online channel, but also from a digital communication standpoint.
The next one on page eight is consumers going more green and more natural. As a result, on page nine, us as a company, we need to capture those trends, and we've been doing a lot of things in the first half of this year to continue to promote preventive health to consumers and give them the right products. That means launching products with immunity-related claims, also enhancing our proposition around protection and immunity for our infant formula and our infant probiotic, et cetera. On the online and digital communication standpoint, accelerating our online sales, and ensuring that we have a direct consumer and communication with the consumer on digital channels and social media channels has been a key focus for this first half of the year and has translated into more consumer engagement and a drive of our online sales.
From a natural and sustainable perspective, for those of you who follow the company for some time, you will appreciate that we've been, for a long time, talking about this natural trend of consumer becoming more natural and also looking at sustainable brands, sustainable products with more sustainable packaging, with more purpose-led proposition. I think we are very well positioned as an organization to answer those trends and accelerate our movement towards a more natural and more sustainable offering. On page 11, you've got a snapshot of our overall performance as a group. It's obviously a mixed performance. We've grown double digits in China with 12.8%, which is a strong performance. The main challenge we have faced is obviously in the ANZ region, where we have gone down negative revenue 35.8% as a result of the Daigou growth downtrend.
Our rest of the world market has also negative sales of 4.9%, mostly as a result of the Hong Kong SAR sales drop that I'll come back after a while. Rest of other markets actually performed on the positive trend. As a result, China remains our number one market with 82.6% of our total revenue, and our ability to continue to drive growth in the Chinese market going forward, with the resilience that China has shown beyond the COVID-19 pandemic will be key for our success going forward. I'm now on page 13 to give you a snapshot of our BNC performance.
Obviously mixed performance again with IMF on the downtrend for the first half of the year, but a very strong performance of our probiotic supplement business as a result of this immunity demand on the upward trend, and also our leading position in infant probiotics, which has helped us to capture most of this demand. Also a strong performance of our other pediatric products, including baby diapers, as well as our GOOD GOÛT products both in France and in China. I will now deep dive into our performance by geography. I am now on page 16. Now zooming on the China market, which again is our core market. Again, 12.8% growth. We can see that the growth is actually mostly contributed by our ANC nutrition care segment, which has grown 27.9%.
I'll come back to Swisse China and why China has grown and what we're doing in China to accelerate the brand. Obviously both segments have grown, with an even stronger growth on the ANC side of things. I will now spend a bit of time on BNC segment. I am now on page 17, so Baby Nutrition and Care segment. On the IMF side, which still represents the largest contributor to our Baby Nutrition and Care segment, the fact that the traffic has not fully recovered on offline, post-pandemic in China in the first quarter, has impacted our revenue and also the timing for our channel extension. When we were together in March, we explained that we want to continue to penetrate into more baby stores and increase our distribution into the baby store channel in China.
As a result of this low traffic offline, we have been really keen to focus on nurturing the business we have with our existing stores, and as a result, we have delayed our further expansion into channel. We have now resumed that towards the end of the first half, and we will carry that distribution going forward in the second half. At the same time, our online sales has grown really strongly, which we think is really important for us to capture the growing demand from Chinese consumers on the online channel. I already spoke about the probiotic supplements and the Dodie diaper segment, which have grown quite nicely with our premium proposition and our super premium proposition in the diaper segment. We now own 11.3% market share of the baby diaper segments in China, which is one of those fast-growing categories that we need to accompany.
We have also launched an infant nutrition range of supplements on the back of our strong infant probiotic supplement proposition, leveraging the Biostime brand with its immunity and protection brand positioning. We have launched calcium VD and DHA supplements and have also leveraged our network to display those products around our different sales channels. A snapshot now on page 18 on our IMF performance. Our market share has held pretty stable in the first half of this year. Obviously, a mixed performance in terms of different channels, but you can see on the next page our e-commerce sales. Market share has grown from 2.2% last year to 2.8% in the first half of the year. Still in e-commerce, we're still ranking number 11. Our ability to continue to grow faster to capture this huge e-commerce opportunity will be key for the business.
At the same time, baby store is still our number one channel, and we need to continue again through more store penetration to increase our market share in this region. You also see on page 18 again that goat's milk infant formula is now accounting for 5.8% of our total IMF sales. There is no year-on-year comparison to last year because we actually launched that series in the second part of last year. Our ability to have now more than 5% of our total IMF in the goat segment is promising, and we see still some strong growth opportunity as we go forward into this new emerging category of IMF in China. On page 20, we are now on ANC China, a very strong performance.
We are quite happy about this performance because again, five years after launching Swisse into China, we're still seeing very strong growth as a result of a growing brand awareness, but also as a result of an online business, and demand from consumers for VHMS on the online channel on the upward trend. Swisse is still today the number 1 brand online for VHMS vitamin supplements in the China market, and we'll continue to grow that business. We have confidence that there is still a lot of opportunity ahead in light of this immunity demand to grow our China Swisse business going forward, obviously on CBEC, cross-border e-commerce, but beyond that, also into more channels, including normal trade, online and offline. On page 21, in the Australian, New Zealand market, we have definitely continued to face challenges. We had highlighted that during the first quarter results announcement.
We were still facing pressure from the Daigou related channels as a result of the COVID-19 pandemic and the lockdowns, the fact that the Australian border has been closed. Obviously, no Chinese tourists in Australia and Daigou stopping trading, and therefore, this has impacted our China related sales in Australia as a result. That being said, our domestic local consumer demand has remained stable. We see some positive growth in some channels where domestic consumers shop more, including the grocery channel, which has delivered robust 40% year-on-year growth. Also very fast growth on e-commerce, just as a part of that global trend that we mentioned. Obviously from a small base, but Australian consumers are equally shifting online to buy more supplements. We are capturing these additional opportunities to try and enhance our domestic demand. Quick snapshot on the rest of the world's performance.
-4.9% overall, but mostly as a result of the sales decline we have seen in the Hong Kong SAR, which we report as part of our rest of the world market. Hong Kong was the first market we developed outside of mainland China a few years ago, and obviously very much linked to Chinese mainlanders traffic and as a result of the COVID pandemic also, no more Chinese tourists coming to Hong Kong, which has impacted our sales. Despite that Hong Kong weak performance, the rest of the world, including France, including Europe, and other regions, are overall still growing. That's promising because that's still part of our global efforts to expand our brands into more territories.
I would just highlight two parts, because otherwise, if we have to talk about each market one by one, it would take more time, although we are very passionate about those developments. Biostime in the French market has gained the number one position in French pharmacies for organic IMF only three years after its launch. We're very proud about this performance, and it has continued to perform quite well throughout the first half of the year. Despite the COVID disruption, we have still continued to carry our plans to launch Swisse into more territories, and I will call out again the launch into the Indian market, 100% digital and e-commerce driven, and also our entering to the Malaysian market as part of our strategy to move into more markets in Southeast Asia.
Quickly on page 23, again, a lot of investors have been concerned, more from a global standpoint, on how a company during a global pandemic can maintain a continuity of operations. I think we have demonstrated during the first half a strong ability to navigate through a lot of supply chain challenges to keep our supply chain on track, control our cost of goods sold, make sure we get products to the market, and ensure all the hygiene and health measures that are necessary for our production, manufacturing facilities, and our suppliers to operate normally. We haven't seen any major disruption to our operations, which we think is an important performance to highlight. I'm now clicking on to page 26 just to make the point here that, beyond the pandemic challenges as a company, we need to keep our long-term ambitions.
We need to demonstrate agility on the short term to adjust the way we do business. At the same time, our long-term strategy and our long-term commitment to sustainability isn't changed. Without going through the details, I would call out as part of our ambition and our goal to become a B Corp certified organization, we spoke about that before. We have just got the certification of our first brand and entity, GOOD GOÛT, our baby food entity in France, which has just been certified B Corp last week, and we are very proud of this performance. It's also a great encouragement for the rest of the group and our teams across the globe to get to that certification. I'm now on page 27 to provide a quick outlook of how we think the rest of the year will look like as a total business.
Obviously, we are still aiming at continuing to drive profitable growth at the group level for the full year, despite the challenges brought by the pandemic. We obviously haven't seen the end of this pandemic as we sit now, and we think it will continue for a while, so we need to be ready, but at the same time, we think that we'll still be able to deliver a profitable, positive growth for the total year as we stand out now. We will continue to accelerate digitalization of our sales and communication with consumer. At the same time, as Fei mentioned at the very beginning, our ability to continue to grow offline, which is also an important part of our business, both in China and Australia, through penetrating into more stores, capturing more channels, is equally important.
We think through these measures, we'll be able to gradually recover from an IMF perspective in China and also with domestic demand in Australia. We'll continue to see pressure from our Daigou business in the ANZ region throughout H2. This is obviously going to last for a while as Australian borders are not reopening. Again, we will refocus our efforts in the ANZ region on the domestic market to make sure we capture growth there with the local consumers. As a total business, again, we are committed to continue to deliver healthy cash flows and continue to work on improving our leverage, which is we think now at quite a healthy level. We'll continue to be dedicated to improve our balance sheet and demonstrate a strong financial performance and financial health.
On page 28, as part of our strategic initiatives around H2, obviously growing and continuing to deliver growth out of China business will be very important, both for BNC through distribution expansion, through launching new products. Both for Biostime and other BNC products to help us get into more stores and fuel the growth of our business is part of the initiatives we are working on. On ANC, beyond growing CBEC, cross-border e-commerce, we are going to accelerate our normal trade expansion, both offline and also in normal trade online, through more products, including new blue hats upcoming in the next few months. Transforming our ANZ business through more focus on the domestic consumer and more focus at the group level, both in China and outside China, on driving digital channels and engagement with consumer in light of this new norm.
I will now pass it on to Jason to present to you our financial performance for the first half of this year. Thank you.
Thanks, Laetitia. Good morning, everyone. Now let's go to page 30 about additional financial information. In this page, as you can see, as just mentioned by Fei and Laetitia, we managed to achieve the moderate revenue growth in the first half, despite the COVID challenge, and also to maintain a stable adjusted EBITDA from last year. Also want to highlight here is that our net profit on adjusted basis increased by 8.9%, thanks to the continued efforts to improve our finance cost and tax expenses. The next page, 31. As you can see, the company has managed to maintain a stable gross margin despite the product mix change and also market mix change in the first half across the categories.
From the total group portfolio point of view, this is a quite stable gross margin, which can enable to have the sufficient resources for the investment into the mark branding channel and new product development with the profit generated from the gross profit. Next page 32. You can see the snapshot of the selling and distribution expenses development. In the first half of this year, our total group selling distribution expenses as a percentage of sales reached 38.7%. Even though it is 1.3 percentage points higher than the first half of last year, but as you may recall, the overall product mix and market mix are quite different from the first half of last year.
In order to help you to better understand the overall development trend, on the right-hand side of page 32, we listed the full year basis as well, because this as we see is more comparable when you look at the overall S&D ratio trend development. As we indicated during our FY 2019 annual result communication, the 40% of S&D ratio reached last year is really the peak level for the group. Down the road, we target to gradually bring down this ratio. If you look at the actual development in the first half, definitely this trend continues for this improvement. If we look at the breakdown between the BNC and ANC, clearly for the BNC, this improvement continued in a very clear way.
While for the ANC, the ratio is higher than the last year, but this is mainly due to the lower than expected sales of the ANZ market. If we look at the ANC China market itself, which is the largest market within the overall ANC portfolio, this S&D ratio got improved by 2 percentage points in the first half. Therefore, this is a kind of key focus of the whole management team to drive for the spending efficiency improvement for both BNC and ANC. Next page, 33. You can also see the breakdown of S&D ratio between the new markets, new initiatives, and also the investment into the existing markets and existing categories. As you may also recall, the financial control principle, we indicated before that the investment into the new market and new categories should not exceed 10% of the total S&D expenses.
From this page, you can see this principle was well-maintained both last year, but also in the first half of this year. Therefore, we can strike a right balance that on one hand, we ensure the sufficient investment of the resources into the new market and new categories, but on the other hand, we still maintain a healthy margin level for the group total. Next page 34. Also, you can see the overall admin expense development in the first half. It is the same direction for the overall spending efficiency improvement. As you can see from this page, in terms of both absolute value and also the percentage of the sales, this admin efficiency got improved in the first half of this year. Next page is 35. Let's look at our balance sheet position. Overall, we have maintained a stable working capital turnover.
Of course, as you may already noticed that our inventory turnover days stand at a quite high level in the first half of this year. If we look at the other breakdown. For the BNC, the inventory turnover days actually got improved from 139 days last year to 132 days now. As we also indicated before, we see based on our overall supply chain model, the normalized range of turnover days for BNC shall be from 130-140 days. Therefore, the current level is right within this range. As for the turnover days of ANC, it increased from 250 days- 298 days now. This is mainly due to two reasons. One is the need to build up the safety stock during the COVID-19 challenge in the first half.
Secondly, this is due to the lower than expected revenue growth for the ANZ market in the first half. It is one of the key focuses for the management team right now to further drive down the inventory turnover days for the overall product portfolio. Just want to highlight here is that despite this high inventory turnover, the quality of the inventory actually got improved in the first half, so that the overall slow-moving provision of the inventory as a percentage of the overall gross inventory decreased from 8.4% last year- 6.5% now. Definitely, this is a clear sign of the improvement of the overall inventory quality. Let's move to the next page 36 to look at our cash flow and liquidity position.
As both Fei and Laetitia mentioned, thanks to the high cash generation of our business model, we managed to achieve RMB 1.2 billion operating cash flow in the first half, which is 25% increase from last year. That's our liquidity position at the end of June, reached RMB 3.4 billion. This is a significant increase of the overall liquidity resource we have in hand, and this strong liquidity position can enable us to have the sufficient resource to drive the further business growth going forward and ensure also the steady return to our shareholders. Next, page 37 to look at our overall capital structure. As you know, we successfully completed the refinancing of our two debt instrument last year. Now we have these two long-term debt instruments. The senior notes will mature in October 2024, and term loan will mature in November 2023.
Therefore, the company does not have any immediate pressure of short-term debt obligation. This is a quite healthy and long-term capital structure we have in place now. Also, thanks to this successful refinancing, we managed to significantly reduce our finance cost in the first half. Versus same period of last year, this is a reduction of over 19%. Also, with the improvement of the overall liquidity position and stable EBITDA, our net leverage ratio also came down further from 1.65 times last year to 1.38 times. If you recall, four years ago, shortly after the Swisse acquisition, the company's net leverage ratio at that time was well above three times. Over the years, with this continuous generation of the cash flow, we managed to bring down now to this very healthy 1.38 times.
Going forward, we will continue to maintain this profitable growth, healthy cash flow, strong liquidity position, as well as a stable capital structure. Also, we will maintain the continuous dividend payout as a steady return to our shareholders. Thanks. This is a quick snapshot of our financial position.
Thank you, Jason. We are now ready to take questions from the audience. As a reminder, you may submit a question by text by clicking the question mark symbol on the left side of the webcast panel. Kindly submit all questions in English. I will now pass it over to Ms. Joy Tsai, Investor Relations Director, to commence the Q&A.
Good morning, everyone. I already got some questions from several investors. The first question is from Ling Wu from Bank of America.
Her first question is on IMF competition. How should we think about competition versus strong local players as we penetrate into lower tier cities with our newly registered domestic IMF series? What measures are we taking to differentiate ourselves and gain shares from the incumbents in these markets? Her second question is on the gross margin side. For the first half this year, we saw pressure from negative product mix, especially for BNC. Will the pressure continue into 2021? What is our outlook for group levels GPM in the coming two to three years? What would be the drivers for the margin expansion?
Thank you, Joy. It's Laetitia here. I propose to answer the first question and to have Jason answer the second question, if that's okay, which is more a financial question. On your first question on the IMF competitive landscape and how we can find growth drivers in light of this competitive landscape. Indeed, it's a very competitive market. The market has always been very competitive. Definitely the premium and super premium market is still growing. That's, I guess the first element which is important to highlight is there is still growth to capture, particularly in the super premium segment of the IMF market.
What we need to do and what we have needed to do first, to be able to grow online, which I think we have been able to demonstrate that during the first half, and we will continue to put more effort into driving growth on the online channel. Definitely not through price competition, because we also see some players entering into more heavy price promotions, which is not part of our DNA or our way of doing business. We absolutely have to play on e-commerce through driving high quality content, working strategically with the platforms, putting more marketing efforts online, which we have done throughout the first half, and we will continue to do so during the second part of this year.
The second very important driver for us to gain competition and competitiveness in the offline market is to be able to increase our penetration, because compared to our average rate of penetration of distribution versus strong domestic local players or even very established international players, we are still not present in enough baby stores. We need to gradually increase this distribution, and that is something we were planning to do in the first half of this year gradually, but because of the pandemic and the slow traffic resuming offline, we have put these efforts on hold to try again and maintain our share with existing stores and maintaining their business before expanding further. We are now resuming those efforts, and that goes along to your next question, because channel expansion goes along with product strategy. We need to put together the right offerings for this distribution penetration.
When we talk about expanding distribution, we look more into going into tiers 4 and 5 cities, expanding to more smaller tier cities where we are less present now. Once we do so, obviously we do it both with our imported super premium proposition, but also, as you just mentioned, with some of our local-made SKUs, that we now have three SKU registered from our local factory in Changsha. We used to have only one. We got two more SKUs in July of this year. We are now able to carry forward this distribution plan for these new series. We are expecting to get another imported one towards the end of the year if things go smoothly.
Along with our enhanced infant nutrition supplement range with these new SKUs, and also with new trade and channel incentives, we are putting more effort into resuming these distribution penetration. What is really key is not just to enter more store, but also to make sure that we drive sell out of these stores, that consumers are coming to buy into these stores. We are also focusing more of our efforts into more activities and education activities with consumers, both offline into those new stores, with the help of our distributors and also our retailers, but also online through live streaming and online education classes for moms as consumer also turn more digital.
We think with all these initiatives, we are in a good position to gradually recover this offline decline that we've seen in the first half through, again, more penetration with the right product portfolio and the right efforts on consumer education.
Yeah, you mentioned the total baby store in China and how many store we sell to the store.
Yes.
We still have room to grow.
Exactly. We have a plan to expand into 10,000 more baby stores in the second half of the year, on top of the more than 30,000 stores that we have by the end of the first half of this year. To be able to enter into more stores, we also need to have more distributors, because our existing distributors have a coverage that might not enable us to go deeper into tier four or five cities. Therefore, we are now expanding also the number of distributors we work with. We are onboarding more distributors during the second half of the year to help us to move further into this offline baby store channel.
Yep. Regarding the second question about the gross margin of BNC, Ling Wu observation is correct. For IMF, in the first half of this year, the gross margin slightly declined, mainly due to this product exchange, since now the new IMF categories, like the goat milk IMF and organic IMF, now accounting for over 10% of the total IMF sales. This new categories, their gross margin is around 60%, so slightly below our core series. Going forward, with the improvement of the supply chain efficiency, thanks to the buildup of the volume and also the standardization of the promotion practice. We expect to further improve the gross margin of our new series. Plus also the gross margin of BNC is supported by the increase of the probiotics gross margin. For the probiotics, the gross margin in first half increased by 2.6 percentage points.
Thanks to the improvements of manufacturing capacity utilization. Since the probiotics is growing at quite high double-digit level, it has a positive impact on the overall product mix within the BNC portfolio. Going forward, we shall see the continued pressure from this product mix change, but with the efficiency improvement and also the volume buildup, we try to aim to mitigate the certain impacts from this product mix change. On other hand, regarding the ANC, our gross margin improved slightly in the first half thanks to the higher revenue proportion from the contribution of the China market, which has the higher gross margin level than the other markets. It is a positive development gross margin-wise. This is why overall for the total group portfolio point of view, we still target to maintain a stable gross margin going forward.
Okay. The next question is from Garth Francis of Foord Asset Management. His question is, outside of goat milk IMF, how much market share in cow milk IMF was lost and to which competitors? Do you expect these shifts to be permanent?
Hi, Joy. Thanks for this question. I just want to clarify that the data we have from Nielsen does not include goat infant formula. The business we build with our goat IMF is on top of this market share. The market share from Nielsen is only cow IMF. Again, our market share has been almost stable, from 6.2%- 6.1%, and where we have dropped 0.2% is on the baby store channel, while we have grown in the online and on the supermarket channel. I just want to clarify this point. Again, on the goat IMF side of things, we've seen nice developments with additional growth opportunities for the business.
As mentioned earlier, the way we can regain market share in the baby store channel going forward is obviously through gaining market share with our existing baby stores, but also expanding our penetration into more stores. To the previous question earlier, again, our penetration in baby stores is not even at 50% because there is over 100,000 baby stores in China, and by the end of June, we were at 41,000 stores. If we even extend 10,000 more in the second half of the year, we'll still be at 50% average penetration rate, which still means that we have room to grow, to gain market share going forward back into the baby store channel. Again, this needs to be a gradual penetration. We can't do it at once, otherwise we compete with ourselves and our existing partners.
We'll be keen to do that gradually and to make sure we don't just open more stores, but also drive traffic from these stores through educating the consumers about our products into the stores and online.
Okay. The next question is from Taolo from Maple-Brown Abbott . The first question is, can you please break down the ANC sales to domestic versus Daigou business? What was the decline in the Daigou business year-on-year? The second question is there an obvious reason why first half SG&A sales to sales ratio is always lower than the full year?
Thank you, Joy. I will reply to the first question and invite Jason to answer the second one. We have, in our presentation in the slide related to ANZ, a breakdown of our ANZ sales between corporate Daigous and retail sales in ANZ. We've got 31% of our sales in ANZ, which are selling directly to wholesalers who are then reselling to C2C operators in China or Daigou-related channels. That accounts for 31% of our business in Australia. That's on page 21 of our presentation. Within the retail component of our ANZ sales, we still have some Daigou, we call it retail Daigou-related sales, because you have some Chinese, either tourists or Chinese residents in Australia or Daigous that are buying from the shelf in the retail.
Within that-68% component of retail, there is also an element of Daigou sales, but it's very hard to quantify it because they're buying in the store products just like domestic consumers would do. We cannot quantify how much of that percentage is coming from Daigou. Again, in that domestic retail, a large component is domestic, like domestic Australian consumers, and that is the part of the business going forward, where we want to focus our efforts to restore growth in the domestic market while we anticipate the Daigou-related business going forward will be mostly driven directly from China.
Yeah. Regarding the second question about how the company can manage to achieve this SG&A ratio lower than the other full-year level of last year. Here I can provide you a bit more insight. If we look at the breakdown by BNC and ANC. For BNC in the first-half of this year, the SG&A ratio is 35.8%. This is a quite significant decrease from both first-half of last year and the full-year of last year. This is mainly driven by the whole overall efficiency improvement measures implemented by the other company, also thanks to the faster-growing online sales. If you look within the BNC, the ANC percentage of the sales actually increased by two percentage points from first-half last year to first-half this year. This is mainly due to the fast-growing online channels.
As we just mentioned, the online IMF sales increased by close to 33% in the first half of this year. We also, at the same time, managed to improve the efficiency regarding the channel investment. For example, after the COVID-19 outbreak, then we managed to reduce the offline promotion activities and move more to the online consumer education activities in the form, such as the live streaming. That in terms of the expense spending efficiency, that got improved in the first half. Also want to highlight here is that certain offline activities in the first half also now being moved to the second half, since those activities could not be carried out in the first half during the COVID-19 period. We sure see the BNC expense ratio to go up a bit in the second half.
If we look at the ANC expense ratio profile, as I just mentioned, it increased from the last year due to this mix change. Since there is a lower than expected revenue generation in the ANC market. In the other China market itself, we managed to improve the spending efficiency as well. In the second half, we have planned some additional spendings because, as you know, in the second half, we will have the important Double 11 campaign. Even though in the second half, this ratio will come up a bit, but as we just mentioned, it is a very clear financial control principle of the group that the total S&D ratio should be kept at 40%. On the full year basis, we should see this ratio should stay at around 40% or slightly below.
This is the direction we are aiming for so that then we can still ensure the sufficient resource invested in both ANC and also channels to support the growth of the business, at the same time, still maintain a stable overall EBITDA margin for the group.
Okay. We have another question from Teresa from Cartica. She asked if COVID is positive for immunity products, but negative for offline sales. How does this net out in a post-COVID world? Second, how many divisions needs to be certified B Corp before the whole company becomes B Corp?
Thank you, Teresa, for your questions. I just want to clarify the first part of the question again. Am I understanding correctly? We see positive growth in the immunity-related category, but negative growth offline. Is that talking about the overall business, Joy, or Teresa directly? Just to clarify.
Yeah, I think it's overall business.
Okay, our immunity categories are sold both online and offline, right? I guess these are two different dynamics in the business. For immunity-related categories growth, I guess that is an overall trend that we see is going to carry forward beyond the COVID pandemic, because consumers now are getting more aware that they need to proactively manage their health. This is a trend that we have foreseen for a long time, actually since Biostime was launched 15 years ago. That was an immunity proposition, an immunity claim. That's something we have educated the market for a long time, and the fact that we have seen over 45% growth in our probiotic segment in China, I think also demonstrates that consumers are moving much more proactively to this category. We do foresee that going forward, this immunity related category will continue to see strong demand.
Obviously, more competition is coming to this game, so we need to be able to launch the right products, but also to talk to the consumer in the right way, to explain to them how our products can improve their health and contribute to boosting immunity. That is something we'll continue to put R&D efforts and also science communication and digital communication on. Your second part of the question related to the drop we have seen in our offline channel. There's two dynamics. One is in China and one is in Australia, for different reasons.
In China, we're talking about the offline traffic which is not fully resuming, as said earlier, we need to resume growth in the offline channel, and we think we will see a gradual recovery once we are able to further work on our distribution, penetration, and acceleration into more stores in the IMF segment. In Australia, the element which is dropping offline is Daigou-related. As said, also in the domestic part of our business in Australia, there is actually opportunity for offline to grow into more channels, including grocery, also including more community pharmacies.
We have launched a new range in the first half of the year called Nutra+ by Swisse, which is a practitioner-recommended range, which will help us also to get into more community pharmacies in Australia to target the domestic consumers who are buying supplements from the pharmacy shelf through a recommendation from the pharmacist. We still do think there is opportunity for us to continue to grow offline, when traffic resumes after lockdowns in Australia, obviously, and in China, again, through more distribution. Your second question on B Corp. Always very happy to answer your questions on sustainability. I know you're very keen about our progress in this field. Getting certified B Corp at the group level is a complex exercise because we need all of our entities to be certified, and we have a lot of entities in the group. We are now taking a regional approach.
Obviously GOOD GOÛT is certified now in France because most of our group business now is in France, so they can leverage that claim also as a brand in the French market, which actually resonates really well with their proposition around sustainable and organic baby food and children healthy food. If we want to become B Corp certified as a group, we need to have all of our European entities certified. We need our American entities certified, also our China H&H entity certified, and also Australia and New Zealand. Now we have all of our managing directors across all different regions working really hard through the certification, through the assessment. We are now looking at having our ANZ entity certified by next year, and we'll go step by step. This is work in progress. We're doing that in parallel at each regional level.
Okay. The next question is from Chris Leung of Templeton, and actually, his question is very similar to Larry from Credit Suisse. I'm going to combine two questions together. Chris and Larry asked about our inventory. Further to the inventory level for the ANC business, where is the inventory standing right now? Is this valued at raw material level or finished goods? Does management have a target for ANC inventory for the next 12 months? What is the definition for the slow-moving inventory? Right now, in terms of the higher than normal inventory level and intention to focus on ANZ domestic markets, do you anticipate price competition to be more intense than normal in Australia? Can you provide some colors on the performance on ANC and BNC business in July and August?
Jason, would you like to answer this question on the inventory related part?
Yeah, sure. Maybe I can answer the first part regarding the inventory. For the BNC inventory build-up, it is being built up in both China and also Australia. As we just mentioned, it is quite necessary during the first half for us to have higher safety stock level during the COVID, but also the inventory went up in ANZ. That's mainly due to the lower than expected sales. Within the inventory, the super majority is the finished goods. As you know, the average shelf life of ANC products is three years. We still have the sufficient time to gradually dispose, to reduce and consume those inventory, since the current inventory provisions still at a quite healthy level at 6.5%. Regarding the target going forward, what do we see based on the current supply chain arrangement?
If we can manage to bring down the inventory turnover of the ANC from 298 days- 250 days. This will be quite a good level of the improvement in the coming months. Going forward, we want to bring down the overall group inventory turnover days from currently around 180 days to around 150 days, which is the level of the last year. This is the direction we are working on right now to bring down overall to back to the level of the last year. Now maybe Laetitia can share more color regarding the ANC domestic market competition.
Sure, Jason. I think there was another part of the question in between related to providing color on the performance of both ANC and BNC business in July and August. I would say that overall, pretty much in line with the trends we have spoken about for the first half of this year. The only difference being that in the IMF space in China, as mentioned earlier, we are resuming our distribution efforts to penetrate into more stores, which we had put on hold in Q2. We are doing that now as we speak. We have onboarded more distributors and have already started to open more stores. This is resuming as we speak now. In ANZ, we are facing the same pressure from Daigous. As mentioned, we think this will continue to be valid for the whole year as Australian borders have not reopened.
Domestic consumption is still stable. Obviously, lockdowns in Melbourne region, so people are buying more online, less offline. As soon as lockdowns are over, we will be keen to resume also our distribution efforts into more offline channels such as grocery, et cetera. We are capturing the also online opportunity. Overall in ANZ, of course, the Daigou pressure is still here. Jason mentioned regarding inventory. Obviously, at the beginning of the COVID-19 pandemic, we were very keen to build a safety inventory to make sure we don't run out of stock. With a slower than expected performance from Australia, this has resulted in a slightly higher than expected inventory for the first half.
As we navigate through the Daigou challenges again in the second half, we put a lot of attention on our inventory to make sure we don't overproduce, and we deal with the slow-moving inventory to try to keep our inventory as healthy as possible. Be sure that we are proactively managing this. Of course, inventory level at ANC is high as a result of the ANZ pressure. We are managing that very proactively. Your last part of the question was related to as a result, the price competition in the Australian market. I guess for us, we tie to our principle that we don't want to, in order to get rid of inventory, to discount products into the market because that would result into price disruption as Australia and China, CBEC, as you know very well, Chris, are very much interconnected.
If we run heavy promotions in Australia as a result of high inventory, then obviously that will result in price disruption in the CBEC market in China, which we don't want to see because our CBEC business in China is running quite healthy. Now it's actually managed by one team together. Our corporate Daigou business in Australia, as this is also China-driven consumption, is also managed together with our CBEC team in China. There is price alignment, discount policy alignment, et cetera. We are managing that very closely in order to avoid a price disruption in the market. If we have to hold more inventory at the company level in order also to make sure that we keep the market healthy, we will be doing so.
We are managing inventory carefully, managing also stock in the market as carefully as we can to make sure that Australia and China markets altogether keep as healthy as possible from a consumer standpoint.
Okay. Due to time constraints, we are taking the very last question from Yixin Luo, Huatai. He's asking, H&H infant formula market share online lagging behind offline. It's possible due to our high-end positioning or maybe it's because of our discounting policy. Management also mentioned several times before to strengthen online channels. Can management share more insights on the reason why we were still behind, and how can we catch up with our competitors on the online channels for infant formula?
Thanks, Joy. I think the fact that we are still lagging behind, you mean we are number six as a total brand in China. We are number 11 online. In this respect, we're lagging behind. This is historical reasons because our Biostime business has historically been quite large offline, particularly in baby stores and also supermarket and pharmacies. Our business historically has been more heavily relying on offline. Actually, the total contribution through e-commerce to our total sales is now at 15.5%, which is historically high for us. It used to be single digits for many, many years. Actually, since the last two years, and particularly in the last 12 months, we have gradually increased our market share online.
I think the performance in the first half is actually demonstrating that in a very competitive online channel where everyone is putting more efforts, we are still able to grow market share. Of course, you might think this is a slow growth, and it's never enough. If we go too fast online, then we also disrupt the business that we have offline. We have to find that right balance, and we have to do that without entering the discount game of really heavily promoting our prices. Otherwise, we will also disrupt our business, and it will become also a more expensive model. We are not pushing our market share online through heavy price promotion. We are trying to build more high-quality marketing content, educate the consumer. We want this online share gain to be gradual and as healthy as possible for the total business.
Yes, we're still lagging behind, only ranking 11 online, but that is also an opportunity for us going forward. We are putting more marketing efforts online. Going forward, we will have, starting from next year, a new SKU that we'll be able to dedicate to our online channel to also have specific efforts on the online channel with dedicated portfolio. We'll be gradually, hopefully, seeing this market share going up. We need to do that balancing the total interest of the business.
Okay. Thank you everyone for joining us this morning. Please stay healthy and safe. I now announce the end of today's presentation and webcast. Thank you. Goodbye.
Thank you. Bye-bye.
Thank you, everyone.
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