Had a listen and here's my take.Management are doubling done on...

Had a listen and here's my take.

Management are doubling done on Daigou. They expected, when Daigou fell away, for the slack to have been picked up by CBEC. Found out that without Daigou doing the marketing for them that this translated across channels and CBEC didn't pick up the slack. CBEC demand is linked to how able/interested Daigou are in taking the brand. All out now to restore Daigou channel to strength with incentives i.e code "for we are going to compromise margin on daigou to get them interested again".

There is too much inventory (relatively speaking compared to daigou) in the CBEC channel and they will be restricting inventory thru that channel while they restore Daigou interest. A2M also have too much inventory on hand and hence the lower forward orders for Synlait. They are very mindful (their words) of ageing of their own inventory. A2M inventory on hand peaked in July. Challenge going forward is to resurrect Daigou. If I remember correctly a year or two back Chinese buyers of IF like recent manufacturing dates, so A2M have to somehow convince Daigou to take stock that is slightly older or else they could have a problem with less saleable stock going forward.

They admit they would like better info on channel activity particularly Daigou.

NZD/USD, NZD/AUD, NZD/RMB rates were/are a problem. They have decided to base FY21 year forecast on spot rates from December.

Re MBS growth. In September they said 77% growth and now in December 40% growth. Race Strauss queried the questioner as to whether they actually said 77%. Few minutes later he came back and said yes they did actually say 77% and they were referring in both cases to value growth. Drop is not due to reduced volume but the strengthening NZD. Volume growth is steady. This shows how problematic a strong NZD is on the business (my comment not his). MBS growth is predominantly new store growth with some instore growth.

Also said in house the question has been put to the board "what about a buyback". Board is considering this question.

So long and short of it is that without the daigou they are in a fair bit of trouble relative to getting back to somewhere where they were positioned in the minds of the market (sharemarket not IF market). Also they have difficulty if the NZD stays strong.

Note that because they admit the demand through daigou and CBEC channels had fallen away my question is what has this cost them in market share of new borns. Not so much the mothers already using A2M as they may have pantry stocked or bought locally in China. If you don't get the expected share of new borns starting on the product it can have a long tail on subsequent stage consumption.

Again you need to have trust that management can pull this off to be a conviction buyer at this SP.