Your idea 100% correct if dealing with luxury goods or wants. We...

Your idea 100% correct if dealing with luxury goods or wants.
We are talking about food stuff, a need for infant.
Image is the last thing when it comes to that. If you are a parent, doesn't matter where you are from you will want the best.
They are however, concern about pricing and availability.
I think the first thing the management should be doing is establish a better channel now for resellers. Official or not (diagou).
Instead of snubbing them, brace them. BAL have stock and crap load of them sitting there. Diagou wants profit, as long as the channels are looked after, the marketing will magically play in BAL's favor.
The brand is no where near damage but just snub.
The next question is how to solve Chinese regulations. That is a game the new management needs to play. There are many options on the table.
The whole saga present BAL an opportunity, how they tackle it will no doubt be taught in text books in the future.