Despite a 43% jump in A2 Milk's China sales, its share price dropped over 8%.
👉 Background: A2 Milk was founded back in the year 2000. Here’s how it works: Regular milk contains A1 and A2 proteins, but A2 milk only has the A2 Protein in their milk (meaning less indigestion and tummy aches).
👉 What happened: In 2012, A2 Milk really struck gold when they launched their baby formula with a focus on the Chinese market. After a big marketing blitz in China over the past year, A2 Milk has announced a 22% jump in profit.
👉 What else: Ironically though, despite a 43% jump in its China sales, its share price dropped over 8%. The overall Chinese market for infant formula shrank by 12.5% because of declining birth rates.
💡 When there is no growth in a market, the focus becomes stealing market share from others.
💡 What’s even worse is when a market size is shrinking - because that means each business will have to fight for a greater slice of a smaller pie.
💡 The challenge for A2 Milk is that China is its most important market - worth nearly half of A2’s total revenue. But as birth rates in China have been declining for several years, it may need to look at other markets for growth.
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