A2 Milk [ASX:A2M] Rises on China Market Registration Update

Australian milk and infant formula producer A2 Milk Company [ASX:A2M] updated the market on the renewal and registration for its China-label infant milk formula.

Last month, A2M announced that its China-label product registration was due to expire in late September 2022.

Synlait Milk [ASX:SM1], which produces the milk for A2 Milk’s China-label product, received notification from the State Administration for Market Regulation (SAMR) that the current registration was renewed.

Year to date, A2M shares have been flat.

Source: www.tradingview.com

China label renewed

A2 reiterated an announcement made by its New Zealand partner, Synlait Milk, in regard to the latter’s market update on the renewal of their China milk label registration.

Synlait said it had been notified of a re-registration put forth by the SAMR (China’s State Administration for Market Regulation) — extending production into February next year.

Coincidentally, this is also when the new Chinese GB (Guobiao, aka, ‘national standards’) requirements will come into effect.

Where China will be bringing about new trade regulations, ensuring imports are vetted through customs before products can be sold to locals.

A2 and Synlait are ensuring the A2MC China IMF label meets the new GB standards, particularly in food safety legislation, by working toward new requirements geared toward SAMR approval.

A2 pointed out that Synlait’s business is linked well with Chinese trade, an advantage seen in cooperation between the Ministry for Primary Industries (MPI) and SAMR.

A2 Milk’s CEO David Bortolussi commented:

‘We are pleased that our current product registration has been renewed, effectively to late February 2023, and we will continue to work collaboratively with Synlait and SAMR in relation to registration of our China label IMF product formulated in line with China’s new GB standards.

‘We remain focused on the China market and are looking forward to the opportunity to make our newly formulated infant milk product available to parents and infants in China.

‘In all circumstances, The a2 Milk Company fully respects SAMR’s governance and timing of this important registration process.’

Synlait said that registering the new GB-friendly recipe has been slowed largely due to COVID-19 lockdowns in China.

However, it doesn’t foresee products being impacted by the registration timetable, calling the working relationship with SAMR officials both ‘positive and constructive’.

Synlait’s CEO Grant Watson stated:

‘We are very pleased SAMR has renewed our current China registration. Gaining re-registration for the new GB recipe is a top priority for Synlait and The a2 Milk Company.’

A2M products in China

Both A2M and other infant formula producers, like Bubs Australia [ASX:BUB], have targeted capturing a slice of the Chinese market share via the daigou distribution stream.

The Chinese infant formula market has been a lucrative one for international producers following local safety issues.

Chinese company Sanlu, for example, was the cause of six infant deaths and 3,000 cases of sicknesses due to melamine-contaminated milk back in 2008.

In 2013, studies suggested that 70% of Beijing citizens were reluctant to buy Chinese formula due to safety concerns.

Since then, Chinese customers sought international infant formula brands, with offshore baby formula products valued by consumers for their perceived better quality.

But Chinese brands have been fighting back lately, as Chinese consumers are more willing to buy local.

Decarbonising the globe

Now, the world is diving into a green-energy future.

One way to achieve that is via electric vehicles (EVs).

And while lithium has dominated EV headlines, we can’t forget equally necessary battery tech materials — copper, nickel, cobalt, and graphite.

With lithium stocks correcting in 2022, there may be a smarter way to play the EV theme this year.

It involves what you might call lithium’s little brother.

Regards,

Kiryll Prakapenka,

For Money Morning