Bellamy's still ranked very well among Daigou

"China is NOT a problem, the demand is NOT a problem, and the regulation is NOT a problem...

The only problem with BAL is a BAD management of supply and sales and the relevant contracts!

I just hope that the Board of BAL can learn something from this and change the company for the better!

After all, it's still a good brand, a good product with a strong demand..."

Again, the article in the AFR today has just confirmed what I wrote in the other forum this morning(see above):

http://www.copyright link/business/retail/...-from-bellamys-china-problems-20161221-gtfojs

• Dec 21 2016 at 1:19 PM
• Updated 32 mins ago

Bega looks to distance itself from Bellamy's China problems
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Bega Cheese - which supplies product to Bellamy's - says demand for baby formula in China is strong. Louie Douvis
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by Carrie LaFrenz
Bega Cheese looked to distance itself from troubled Bellamy's Australia, stating demand is strong for baby formula in China and other Asian countries, as it continued talks with the organic baby food marker about supply arrangements and volume forecasts.

Bellamy's requested that its shares remain suspended from trade on Wednesday for another three weeks while it continues talks with key suppliers and manufacturers, painting a bleak picture for investors about the nature of its problems.

Bega supplies baby formula to a number of customers, including Bellamy's, with product for local and international markets through its plant at Tatura.

Bega chairman Barry Irvin noted the significant price discounting and short term oversupply of baby formula and milk powders in China, but said consumer demand for the category remains.

"While infant formula is important to us, Bega is a large multi-product dairy company with a strong ongoing profitable business in multiple categories," he said. "The guidance I gave on earnings at the Bega AGM is still our position."

The Tasmanian organic baby food and formula company stock has been suspended for a week, following a two-day trading halt. It has now requested the suspension remain in place until January 13.
Rival formula maker, A2 Milk Company, also looked to distance itself from Bellamy's problems in China.

"The company notes the higher level of recent commentary and interest from shareholders relating to the infant formula market," said A2 chief executive Geoffrey Babidge.

"In this context, the company wishes to confirm that, consistent with the trends communicated at the Annual Meeting, the business continues to trade very strongly reflecting, in particular, significant year-on-year growth in its infant formula business."

A2 noted that the near doubling of revenue in the first four months of fiscal 2017 was due to the strong growth in baby formula and milk products, and also included a build in sales ahead of the key shopping event Singles Day in China.

Earlier in December, Bellamy's said it had been hit by a build-up of baby formula caused by changes to Chinese import regulations, and lower sales during Singles Day.

Bellamy's inventory nearly doubled in fiscal 2016 due to the addition of a second manufacturing partner, Fonterra, and the ingredients required to support this initiative, as well as levels of finished goods to support the growing sales of the business.

"The investment into our supply chain through the building of raw materials inventory is a measured and deliberate one," Bellamy's said in its annual report. "While drawing on working capital, this strategy is important in supporting Bellamy's ability to remain flexible and responsive to the fast growing market demand for our products. Inventory management remains a focus for us."

One investor who asked not to be named pointed to a lack of transparency of Bellamy's management.

"If I would attack anything, it would be about disclosure, it has really been appalling," he said.

"The other thing is the market loves a capital light company, Bellamy's owns nothing ... so now you have to decide where is the value of the brand since they don't own any solid assets?"

Livia Wang, managing director of Chinese marketing firm Access CN, said despite its problems Bellamy's is still ranked very well among the "Daigou" - the Chinese personal shoppers. Daigou roughly translates as "buying on behalf of".

"Demand is still there," said Ms Wang. "Bellamy's has a great product. Especially the organic concept is very well received in Chinese community. Bellamy's has the issue of oversupply and pricing from some e-retailers but the most important thing they have a strong brand. I expect Bellamy's will remain a core product for the Daigou market and continuing to grow in the Chinese market."

Access CN estimates the Daigou market to be valued at $150 million last year. The most popular products sent are baby formula, skin care products, UGG boots and supplements/vitamins.

Bellamy's
In a statement to the ASX, Bellamy's requested that its securities remain suspended from trading "pending negotiations with key suppliers/manufactures in order to determine the impact of those negotiations on the company's expected financial results."

Companies theoretically can be suspended from trade for up to three years before becoming delisted.

Trading suspension is a legitimate tool that companies use to help management meet disclosure obligations, but the further extension by Bellamy's leaves investors in the dark about the true depth of its problems.

The suspension in the shares of the one-time market darling came after the stock was heavily sold down wiping $544 million from its market capitalisation following a 40 per cent downgrade to earnings earlier this month.

The stock last traded at $6.68 compared with a high of $16.50 reached earlier this year.

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Cheers and Merry Xmas!