The a2 Milk Company faces a “tough” road ahead as its key Chinese market shrinks and its competition increases. Chief executive David Bortolussi, took over in February and this week fronted with his key executives and a 160-page presentation. It took four hours to outline to investors and analysts the milk marketers plans following a year of unprecedented change in its market. The Chinese infant formula market is worth an estimated $47 billion in annual sales, and a2 Milks Platinum infant powder was really popular with the informal daigou resellers. These were the students and tourists who bought up the product and shipped it home to China. That whole grey market shut down during the Covid-19 pandemic. China’s birthrate fell – and competition from local Chinese companies increased. Shares in a2 Milk, once worth $21 plus – are now trading at around $6.47. They have lost 58% of their value over the past year. a2 Milk plans to spend more on marketing, new products and spreading its reach beyond the largest cities. The company is targeting profit margins in the “teens” in the medium term and in the “low-to-mid 20s” in the medium-to-long term as its business recovers. In 2019, prior to the pandemic, a2 Milk had a profit margin of 32 per cent.
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