A2's special A1-less milk used to be a hot commodity in China. Now, not so much. TY COVID.
A2 Milk is the Aussie milk company worth nearly $5bn. But it ain't your average milk company. They sell a special milk without the A1 protein (aka the protein found in dairy cows). And they also sell a tonne of baby formula.
The Chinese market for A2's baby formula products makes up nearly half of the business' revenue. But COVID came along and stopped Chinese buyers from be able to access Aussie products. And it also saw China's birth rate drop.
As a result, A2 suffered some pretty hefty losses. We're talking 30% revenue declines and 80% NPAT declines. And without the Chinese market, A2 needs a new game plan.
So what's the key learning?
The Chinese baby formula market is a huge win for Aussie milk producers like A2. And it all started back in 2008, when the 'melamine scandal' saw more than 300,000 Chinese babies poisoned by baby formula that contained melamine - a chemical used in plastic.
Since then, Chinese parents have been pretty sceptical about the local milk formula industry. And fair enough. Instead, they turned to overseas providers like A2.
But when COVID hit, it was tough for anyone to send anything overseas. So local producers picked up the slack, and started rebuilding trust in their own brands. Now, with China's domestic producers as competition, Aussie producers need to step up their game, or find a new strategy.
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