The A2 Milk Company
is a relatively young addition to the milk products companies operating in New
Zealand and Australia who are finding that demand from China, particularly for
baby formula, is a very significant source of revenue and profits. Yesterday it announced that it was almost doubling its full-year earnings guidance, as
a direct result of what the company calls “exponential growth” in infant
formula sales into China.
China
suffered a devastating scandal in 2008 when it was discovered that
home-produced baby formula was contaminated, leading to ill-health for more
than 300,000 Chinese children. Since then, demand there for product from
countries that are known to have superior quality control supervision at state
level are in demand. The possession of a green and healthy environment is no
hindrance here either. And the recent changes in the one-child policy in China,
allowing couples to have at least two children, while it will take a little
while to build up, is bound to have a beneficial effect.
This is also
very good news for Irish milk producers and processors. Ireland has recently
won favoured status for the export of farm and dairy produce to China. Here
again, the care with which the agricultural sector is managed in order to
ensure safety, as well as the sometimes grating for natives ‘Emerald Isle’
image, must be of assistance.
… and the grey market is a big help
According to
an article on www.vice.com, there is a booming
trade in grey market sales of baby formula to China from Australia, in particular.
Chinese tourists, students and even business people are sending these products
via specialist vendors, who also arrange transportation. Sent as personal
goods, these packages are able to circumvent the considerable tariffs that
exist on imports into the People’s Republic. A nice little earner, apparently,
and no doubt a useful addition to the bottom lines (if not an explicit part of the business plan, as in "We get Chinese ex-pats to take care of transportation and customs clearance for us") of firms like the A2 Milk
Company.
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