an infant formula phoenix, page-5

The Synlait agm is on 8th December, and as SML are the sole supplier of infant formula to a2m, it will be quite interesting really to receive some more info on these growth rates. I'll be making the trip and attending.

a2's infant formula sales surge 330% in four months

A2 chief executive Geoff Babidge said infant formula is becoming "a more significant growth driver" for the company, accounting for half its overall revenue. Photo: Louise Kennerley

Sales of a2 Milk's infant formula have soared more than 300 per cent in four months to account for almost half of the trans-Tasman dairy company's total revenue.
A2's Platinum infant formula, which launched in August 2013, is one of the brands that has been stripped from Australian supermarket shelves on the back of surging Chinese demand.
Its sales totalled $38 million in the four months to October 31 – a 337 per cent increase compared with the same period last year.
Chief executive Geoff Babidge said infant formula was "emerging as a more significant growth driver for the company" and now comprised about 47 per cent of a2's total revenue.
The company's shares leapt 6.6 per cent on Tuesday morning to a record 89.5¢ - extending a 16 per cent gain in the past six days after China's biggest internet sale "Singles Day" caused the sell out of Platinum infant formula across many Australian supermarkets.

Mr Babidge said infant formula had the potential to account for a bigger portion of the company's revenue, considering the latest increase came as demand had outstripped forecasts.
"Obviously our infant formula business will continue to grow strongly, if only to meet the demand that hasn't been satisfied to date," he said.
"You could make an assumption therefore that it's likely the percentage of the infant formula business to our total business will increase beyond 47 per cent."
Mr Babidge said a2 was doubling its supply to Australian retailers after the sell out of platinum angered mums and dads, who demanded supermarkets do more to safeguard the supply of the essential nutrition for their babies who can't access breast milk.

Platinum, along with Karicare and Bellamy's Organic branded infant formula has been sold on the "grey market" mainly through Chinese retail websites where it commands a handsome profit.
Mr Babidge said a2 had grown its milk supply in New Zealand to 100 million litres and he was confident its New Zealand contractor, Synlait, could produce enough baby formula to meet demand.
Synlait makes all of a2's infant formula at a factory that has capacity to produce 30,000 tonnes a year – close to Australia's total infant formula production of 30,000 to 40,000 tonnes a year.
"They can meet our existing purchase order quantities and a substantial uplift further in respect to those. Secondly, Synlait continue to priorities as a customer and … they continue to look at their issues regarding capacity and they no doubt have plans in place to build their volume throughput," Mr Babidge said.
The strong growth comes after A2 was initially handicapped in capitalising on the so called "white gold rush" for infant formula in China. In July last year, Synlait missed out on the first round of approvals from Beijing authorities to export infant formula.
China slashed the number of imported brands from more than 800 to about 94 in an effort to crack down on the number of brands that had flooded the market following the country's melamine infant formula scandal in 2008 which killed six babies and put another 54,000 in hospital.

Synlait was finishing the construction of a new infant formula plant at the time of the initial approvals, and gained Chinese certification three months later after the factory was completed.
A2's Australia chief executive Peter Nathan said last week the company was exploring options to produce infant formula locally, whether through a contract with another dairy processor or building its own plant.
He said any production of infant formula in Australia would complement its agreement with Synlait.
Elsewhere, Mr Babidge said a2 expansion into the US – which was a thorny issue between its one of its main suppliers and once biggest shareholder, the billionaire Perich family – had missed its sales targets.
But he was adamant the company was making inroads in America, there had just been a lag from retailers in getting stock from their warehouse and to their shelves.
"It's not an issue about us not getting good support for the retailers because we are. It's more about our expectation in turnaround about getting product on shelf," Mr Babidge said, adding it products were available in about 65 per cent of the southern Californian market.
"Peter Nathan many, many years ago initially had those issues with Coles and Woolworths when he was building the shelf [presence]."
The Perich family-controlled Freedom Foods attempted to takeover a2 earlier this year in conjunction with US dairy giant Dean Foods. But the bid collapsed after the US regulator launched an insider trading investigation into Dean.