ATM - A2 Milk Corporation Limited

[longy]

For A2 Milk Company and Bellamy’s, the risks are that their effective addressable market in China will shrink,” Morgan Stanley analyst Thomas Kierath said in a report

https://www.bloomberg.com/news/artic...t-local-output

The last paragraph is interesting. "The newly announced plan doesn’t entirely try to shut out foreign companies. It will support domestic dairy producers in acquiring or setting up overseas bases for milk supply, encourage foreign dairy firms to invest in China as well as tighten regulations on the milk-powder imports and online sales platforms."

Sounds to me acquisition or part own of the foreign supplies is quite possible. I am wondering Bub saw this coming and hence have Chinese owning of 30% its company?

[Lewylewylewy]

The thing is, if your policy blocks trade of milk from country x, then you'll find that country x blocks trade the other way. Of course it doesn't always work exactly like that, and China has very subversive ways to block trade without actually blocking it.

That said, people will always want foreign milk products for their little emperors.

Still, this, combined with the share price is worrying.

I wonder whether the USA market will make up the difference. They've been launching there recently, right?

[longy]

Another factor is what they like to do and actually able to do it is another matter. It won't happen over night either. They have tried this idea back in 2013 but it has not eventuated into reality.

[couta1]

For A2 Milk Company and Bellamy’s, the risks are that their effective addressable market in China will shrink,” Morgan Stanley analyst Thomas Kierath said in a report

https://www.bloomberg.com/news/artic...t-local-output

Lol another day of shorting commentary from the bull, enjoy folks.

[bull....]

Daigou businesses are going to have good time..... The article actually says that it is most likely to keep the US and European companies out of the way and not meant to be aimed at Australasian companies

this article says daigou will suffer

At this stage there is no suggestion of using traditional weapons like tariffs. Rather, the application of heightened regulations on cross border e-commerce sales and stronger checks around quality will be employed.


The move could impact the flourishing Daigou trade - which sees products like infant formula and vitamins bought off the shelves of Australian supermarkets and chemists, and then sold online in China.

https://www.smh.com.au/business/comp...04-p51ufn.html

[bull....]

Lol another day of shorting commentary from the bull, enjoy folks.

lol US markets had a good night last night so if it doesnt bounce the current news must be really serious

[Leftfield]

...I wonder whether the USA market will make up the difference. They've been launching there recently, right?

I think the current SP drop has been a bit of an over-reaction. Although China may try to increase its domestic milk supply, this will take time. In that time A2 has many options;

a.) A2 can keep increasing its current Chinese market share of 8% to offset any threats. 10% remains an achievable target.
b.) Use A2's capital light approach to form new partnerships with Chinese suppliers (risky and not my fav strategy)
c.) Expand A2 into other Asian markets (Korea, Singapore, Japan, Malaysia etc) to diversify away from reliance on the Chinese markets
d.) Speed up the planned IF launch into USA (A2 IF not yet launched in USA, but is planned.)

Let's hope the SP regains some composure as the week progresses.

[longy]

I think the current SP drop has been a bit of an over-reaction. Although China may try to increase its domestic milk supply, this will take time. In that time A2 has many options;

a.) A2 can keep increasing its current Chinese market share of 8% to offset any threats. 10% remains an achievable target.
b.) Use A2's capital light approach to form new partnerships with Chinese suppliers (risky and not my fav strategy)
c.) Expand A2 into other Asian markets (Korea, Singapore, Japan, Malaysia etc) to diversify away from reliance on the Chinese markets
d.) Speed up the planned IF launch into USA (A2 IF not yet launched in USA, but is planned.)

Let's hope the SP regains some composure as the week progresses.

I think the SP dropped was over done too. Part of the following article which I borrowed from another forum.

The trouble here is that China’s attempts to push its people into buying local baby formula product is it requires consumers to overcome a level of mistrust they have with the quality – asking parents to take a chance on what they feed their babies. NZ and Australian producers have always been aware their Chinese sales are vulnerable to regulatory changes, and as recently as last year had to deal with additional requirements for registration. But the New Zealand and Australian suppliers have been trusted by Chinese consumers around quality.

The second leg of China’s plan is to encourage local companies to buy offshore supply and motivate offshore producers to invest in China. It is too early to guess whether this may make Australia or New Zealand companies potential merger or acquisition targets.

[minimoke]

We seem to be forgetting A2 does A2 milk - not just any old infant formula. Clearly local Chinese are struggling with its own generic milk production / formula manufacture. It will take them even longer to get the A2

I think it is fair to assume NZ is a pretty good at herd management. If we are going to struggle converting herds to A2 then how will the Chinese fair?

Just a reminder: https://www.interest.co.nz/rural-new...will%C2%A0take

Also A2 is a "premium" product. China has to get its mass produced IF sorted first.

[steveb]

I wonder if A2 are looking at the condensed milk market,It's pretty big in china.I guess supply of milk could be a problem.