Key Points
- a2 Milk has forecast tough times ahead for the next financial year amid changing markets in China.
- CEO David Bortolussi cited China's low birthrate as a factor.
- He said exporting products from Australia to China isn't as lucrative as it once was.
The common practice of buying products in Australia and sending them back to China, by individual exporters known as 'daigou', is nowhere near as lucrative as it once was, according to the boss of a large dairy company.
a2 Milk has been seeing huge streams of profit from infant formula sold in Australia and other markets and sent back to China, but has predicted that this will dwindle.
Forecasting tough times ahead for the New Zealand company, CEO David Bortolussi said China's falling birthrate was hitting the business hard.
"The China IMF (infant milk formula) market has become increasingly challenged as a result of lower birthrates and increased competitive intensity," Bortolussi said.
Bortolussi said he anticipated the daigou channel to recover to just “half of what it was” before 2020.
This is despite more Chinese international students returning to Australia.
“There [are] a lot of things that are conducive to a daigou recovery. Unfortunately, we’re not seeing a significant rebound in that,” Bortolussi said.
Chinese international students had less desire to continue daigou shopping as there were more alternative job opportunities, he said.
Meanwhile, parents were also increasingly opting to buy their infant formula online and in-store, and in the company's core market in China there had been a move towards Chinese-label products.
Shares in the dairy company dived 11.5 per cent to $4.37 after it announced its net profit after tax rose 26.2 per cent to $144.8 million but forecast tougher goings this financial year.
China's fertility rate is estimated to have dropped to a record low of 1.09 in 2022, according to Chinese media.
The figure from China's Population and Development Research Center put it as having the lowest fertility level among countries with a population of more than 100 million, according to the state-backed National Business Daily.
