A2 Milk has received Chinese regulatory approval to produce tailor-made infant formula for the country for the next 4 years.
China’s State Administration for Market Regulation (SAMR) has re-registered A2 Milk contract manufacturer, Synlait Milk, which is dual listed on the ASX and New Zealand stock exchange.
A2 Chief Executive David Bortolussi said the approval allowed the company to produce stages 1, 2 and 3 formula that is in line with China’s national standards. “We look forward to making our upgraded new China label IMF (infant milk formula) product available to parents and their infants and young children in China, building on the strong brand loyalty we have developed with Chinese families over the past decade as the pioneer of the A2 protein category,” said Bortolussi.
The approval is great news for A2 Milk Company as this provides it with continued access to China’s substantial registered domestic infant milk formula market, which remains the key focus of its refreshed growth strategy.
The refreshed growth strategy in China is an attempt to recover back the losses faced by A2 milk during the pandemic. According to Bertolussi, “More than 70% has been wiped off A2’s market value in the past 3 years following the pandemic-fuelled collapse of the Chinese daigou, or reseller market. The company used to be worth A$13 billion (US$8.75 billion), more than Qantas, but its market value is now about A$3.8 billion (US$2.56 billion).”
Instead of relying on English-label product that daigou (Chinese students and tourists) buy in Australia and send back to China, the company is expanding deeper into China’s general trade, or bricks and mortar retail, which represents about 80% of the total market.
Bortolussi said production of the approved product was expected to begin in June this year with commercial sales to start in the 1st quarter of 2024. The approval will extend until September 2027. The registration, according to Synlait, is pivotal to the long-term success of its advanced nutrition business.
Synlait and the A2 Milk Company have a longstanding and complementary partnership as it seeks to expand in the lucrative China milk market.
