The plummeting fertility rate in China has resulted in a2 Milk losing almost half a billion dollars in just 24 hours.
Baby food company Bubs has launched legal action to pursue $5.7 million in debt from its Chinese distributors Alice Trading and Willis Trading after they failed to deliver on their promise to sell stock, says Sky News host Amanda Stoker. About “five years” worth of Bubs Supreme infant formula is still being held in inventory, Ms Stoker said.
China is a major market for dairy products from Australia and New Zealand.
With the global baby formula market plagued by product shortages and recalls in recent years, both countries are seen to produce high quality products thanks to our clean environment and abundant grasslands.
But the fertility rate in China has plummeted from 1.81 in 2017 to 1.09 in 2022.
“The China IMF (infant milk formula) market has become increasingly challenged as a result of lower birthrates and increased competitive intensity,” a2 Milk CEO David Bortolussi said.
The company said the overall China infant milk formula market declined in value by 14 per cent in the 2022-23 financial year.
a2 Milk sells baby formula into China in two ways, both by selling products directly and through ‘daigou’, which is where products are bought in Australia and sent back to China by individual exporters, many of them Chinese international students.
Daigou sales have been lucrative in the past but the company said they “declined sharply again this year by almost 40 per cent” and Mr Bortolussi told SBS News that he only expected daigou sales to recover to just “half of what it was” before 2020.
“There [are] a lot of things that are conducive to a daigou recovery. Unfortunately, we’re not seeing a significant rebound in that,” Mr Bortolussi said.
Chinese international students are now returning to Australia but have less desire to continue daigou shopping as there are more alternative job opportunities, he said.
“China IMF market conditions are uncertain but likely to become more challenging in financial year 2024 with a further double-digit decline in market value expected,” the company said, releasing its annual results.
Even though a2 Milk reported a 10 per cent increase in revenue in the year to June 30, shares in the dairy company dived to close at $4.27 yesterday after the news, giving the company a total value of $3.08 billion, a $480 million fall from its previous day valuation of $3.56 billion.
The share price subsequently recovered to trade at around $4.45 per share today.
Read More:$480m wiped off dairy company in one day