Daigou market collapse due to COVID alone or something else...e.g lower China purchases?
If the daigou have strong demand (from China), they would go to the supermarkets to get the milk , they can in times of COVID and they will because there is money to be made.
I've long cautioned about China-exposed stocks, the ramifications would be slow and long term. We are paying the price (we didn't have to) , lets hope A2M Chinese shareholders can save the story for them. They even had to declare they're Kiwi.
If you haven't notices, A2M share price has been dropping since early Aug and it wouldnt surprise me if it goes lower to revisit its March lows. A2 Milk cuts guidance as daigou market collapses Sue MitchellSenior reporter
Sep 28, 2020 – 9.17am
The A2 Milk Company has cut 2021 sales and earnings guidance following a collapse in the daigou market in Australia due to COVID-19 restrictions.
In a trading update on Monday, the company said it now expected December-half revenues of $725 million to $775 million, down from $807 million in the first half of 2020, and full year revenues of $1.8 billion to $1.9 billion, compared with revenues of $1.73 billion in 2020.
The earnings before interest tax depreciation and amortisation margin was expected to fall to 31 per cent from 31.7 per cent in 2020.
The guidance implies full year EBITDA between $558 million and $589 million - up from the $549.7 million achieved in 2020 but well below market forecasts around $662 million.
After a strong March quarter boosted by pantry stuffing, sales started coming under pressure in the June quarter and first few months of 2021 as consumers destocked pantries and the daigou channel was disrupted by reduced tourism from China and the collapse of the international student market.
A2 Milk warned earlier this month it had started to see COVID-19 disrupt its corporate daigou reseller channel in Australia due to the extension of the stage four lockdown in Victoria. The company shifted from using retail daigous to corporate personal shoppers as a short-term response to COVID-19.
"In September we have started to observe additional disruption to the corporate daigou / reseller channel, particularly due to the stage 4 lockdown in Victoria," interim chief executive Geoff Babidge said on Monday.
"As a result of all these issues, we are now witnessing a contraction in the daigou channel beyond our previous expectations and without the replenishment orders that would typically be anticipated at this point," Mr Babidge said.
"This disruption in the daigou channel is impacting our September sales and it is currently anticipated that this will continue for the remainder of the first half of FY21. As such, we now expect ANZ revenue to be materially below plan for the first half," Mr Babidge said.
Daigou means "buying on behalf of" and refers to a network of shopping agents who buy products for residents on mainland China for a small fee. It started as a cottage industry but is now big business, with the market estimated to be worth at least $2.5 billion in Australia.
Daigou sales represent a significant proportion of A2's infant formula sales in Australia and New Zealand.
"We believe this to be a single channel logistics issue," Mr Babidge said.
"We are of the view that this short-term impact to the daigou channel will prove to be temporary, assuming stabilisation of COVID-19 related issues in Australia," he said.
Performance in all other areas of A2's business was strong, including the liquid milk businesses in Australia and the USA and the local China business, notably in Mother & Baby Stores (MBS), which was expected to continue. China label revenue was up 77 per cent in August for the year to date and market share in Mother & Baby stores had risen to 2.2 per cent in August from 2 per cent in June.
Victoria has been in lockdown since early July following a surge of virus cases in the state. However, restrictions will start to ease this week.
Last month A2 appointed Hanesbrands' executive David Bortolussi as its new chief executive. Mr Bortolussi is expected to start early in calendar 2021.
Last month non-executive director David Hearn sold 250,000 shares on-market for $NZ20.31 a share.
Mr Babidge defended the share sale, saying the board had only recently come to the view that what was shaping up in September would continue into the next quarter.
"We came to that view on the weekend ... on the basis of continuous disclosure we determined it appropriate to advise [the market] today," he said.
