BUB Share Price free falling !!!!, page-24

Chinese consumers will be encouraged to buy more locally made product under a new action plan.  New York Times
The release of a new action plan for China’s strategically important formula sector appears directly aimed at squeezing foreign players out of both ends of the supply chain.
The plan was prepared by the National Development and Reform Commission and six other government departments on May 23, but released in China on Monday.
An English version is yet to emerge, but some in the market appear to have grabbed the key messages, given A2 shares fell 2.9 per cent on Monday, Bellamy’s fell 3.1 per cent, Bubs crashed 7 per cent and Wattle dropped 2.4 per cent.
The stocks slid further in early trade on Tuesday, with A2 dropping more than 6 per cent. Almost $1 billion has been wiped off the value of the stock in two days.

Sydney-based Credit Suisse analyst Peter Liu has translated the key messages from the document.
Tougher rules

At the heart of the plan is an increase in the government’s target for Chinese produced formula, from the current level of about 47 per cent of the market to 60 per cent.
There does not appear to be a timeframe placed on this goal and it should be noted that the biggest foreign players in this market are European groups Danone and Nestle, American giants Mead Johnson and Abbot Nutrition. Australia could be seen more as collateral damage than a prime target of this plan.
But the plan is clearly aimed at helping Chinese producers lift their game, and encouraging Chinese consumers to turn back towards locally made product.
At the Chinese end of the supply chain, the plan calls for tougher regulation on cross-border e-commerce sales of infant formula and zero tolerance of importing unregistered infant formula; increased patrols and testing of formula in mum-baby stores. There will also be a tougher quality regime, with a new round of testing over the next three years.
Battling tighter regulation is nothing new for Australian and Kiwi players. Formula imports have been subject to an increasingly strict regulatory framework since 2015, with the biggest change coming into force in January last year, whereby all formula products had to obtain registration before they could be sold in the People’s Republic.
But it appears the new action plan gives the government even greater control of imports.
Push to consolidate

The fascinating part of this plan – and perhaps where some Australasian players might even see a bit of an opportunity – is how it calls for Chinese companies to push foreign players out of the market by consolidation, and then replicating of the overseas’ players strategies.
According to Liu’s translation, the government will “encourage Chinese companies to buy foreign producers and/or set up production facilities overseas, so as to reduce cost of raw ingredients”.
On the surface, at least, this does appear to go to the competitive advantage that Australia and Kiwi players have built in managing supply chains of high quality and often organic raw materials.
Notably, the plan says the government will “encourage Chinese producers to broaden sales channels and differentiate to compete, targeting mid-high end market”.
Again, this is the part of the market that the likes of A2 and Bellamy’s have focused on.
All of these initiatives will be supported by funding assistance and tax concessions from the government.
Key points to mull over

A2 and Bellamy’s executives were studying the Chinese plan and its near-term ramifications on Tuesday morning.
An A2 spokesman noted no new regulations have been proposed, or amendments to existing rules.
Industry insiders said three points of context are important.
Firstly, China has long expressed a desire for its local industry to improve its market position, which was badly damaged in 2008 when formula was found to be contaminated with melamine.
Indeed, the local sector’s share back in 2007 was about 60 per cent. It’s notable that the plan calls for Chinese media to support local players and build consumer confidence in them.
Second, China won’t want to risk upsetting consumers too much by pushing imports out of the market completely.
Third, there is a trade war overlay at play here. It does appear the plan has been sitting on the shelf for a few weeks, and some suggest the timing of its release – as China and the US struggle to find common ground on trade – is political and not aimed at Australia.
Still, there’s no shortage of questions for investors to mull over.
Are the Chinese groups still far enough behind in terms of quality and technology that Australasian groups have a bit of breathing space?
Will smaller players in Australia and New Zealand, such as Bubs and Wattle, face the most pressure in a market where the Chinese groups seek to get bigger?
How might increased regulatory scrutiny hurt? Bellamy’s, for example, is still waiting for China’s State Administration for Market Regulation to approve its China-labelled organic formula series, and investors may be wary of the idea of even more bureaucracy.
A final and fascinating question is whether this plan could actually work in the favour of some Australasian players, if they emerge as takeover targets for Chinese groups seeking to own more of the supply chain.



Being BUB are so Asia centric reads like a positive but I have only skimmed it like the technical buy better than the FA