Closing price above $1.82 is crucial, page-197

From this weekend's AFR. Goats milk based IF would also be pure A2, not sure if this will catch on though

Infant formula maker shuns lucrative China grey market
Dairy
Jared Lynch
It has been lucrative for infant formula makers including Bellamy’s Organic and a2 Milk, but Australia’s newest baby nutrition brand wants to stay well clear of the Chinese grey market.
The grey market, in which goods are bought and sold outside legitimate channels, has resulted in thousands of tins of infant formula being stripped off Australian supermarket shelves and sold through various e-commerce channels or mailed directly to China.
But new infant formula brand Nuchev wants to avoid unauthorised shipments of its products. It is even avoiding Australia’s biggest supermarket chains, opting instead to sell exclusively into pharmacies. It has nothing to do with a lack of supply for Nuchev’s goats’ milk-based formula.
Company chief executive Ben Dingle
– who co-founded New Zealand dairy group Synlait, which produces formula for a2 and others –says if a company wants to secure its longevity is has to look after its home market first.
Then there is the theory that to make inroads in China a company must create strong demand for its products locally. ‘‘I think most people in the pharmacy channel understand Australian consumers are the people they need to be focusing on to build a long-term, sustainable business,’’ Mr Dingle said. He said it was not wise to cross Australian parents, and indeed hoards of mothers and fathers were angered late in 2015 when several popular brands of infant formula were sold out in supermarkets after China’s biggest online sale, Singles Day.
‘‘We have decided it’s a very sound strategy to absolutely focus on the Australian mum, make sure we deliver what’s important to her and understand where she sees value, and try to limit as much as we can any product following through the grey channel.
‘‘We can’t stop a customer walking into a store, buying product off a shelf and then putting it in a box and sending it offshore.
‘‘What we can keep our finger on are retailers diverting product from a store shelf and sending it directly to export. And the first thing you do is sit down with those particular people, have a chat about it and say, ‘this is not our model. We want you to stop doing that and focus on the Australian mums, who are your customers’,’’ he said.
Fairfax Media revealed in December about half the infant formula sold by Australian supermarkets had been shipped overseas, most likely to China.
Sales of formula have almost doubled but the number of Australian babies has declined since 2012, from 310,000 to 300,000. There has been no significant fall in breastfeeding rates of Australian mothers over the same period. But formula rates in China are stratospheric. It’s estimated just 25 per cent of its 20 million babies are breastfed.
Mr Dingle said Nuchev had eyes on China and was ‘‘well advanced’’ on gaining certification to sell its Oli6 brand of formula, hopefully by early 2017. The company is raising $20 million to strengthen is distribution across Australia, then into China, with Greenstone Partners and Bell Potter as joint lead managers for the fund raising.
‘‘The Oli6 brand will be available in China through the more regular channels – baby stores, online, highend supermarkets,’’ Mr Dingle said.
‘‘Our market research tells us mums in that premium space for infant formula in China aren’t interested in buying products through the grey channel.
‘‘If you are going to encourage a whole heap of products to flow through the grey channel, your distributor partners ... will get a bit grumpy – you are essentially competing with them for customers.’’