Birth woes
OPINION: What does the birth rate in China have to do with stock trading? Just ask a2 Milk Company.
The company has gained registration for its Infapure formula brand under strict new Chinese regulations that require infant formula manufacturers and brands to gain approval from China’s National Certification Authority (CNCA) in order to export.
These new regulations have seen more than 400 brands of New Zealand origin disappear from the Chinese market, with a large number of manufacturers still awaiting approval.
Biopure managing director Simon Page says that gaining registration is a “game changer” and puts his company in the box seat for dramatic expansion.
“It was touch and go for a while there, a large majority of companies haven’t been able to secure contracts with CNCA approved factories and have either gone out of business or had their plans to launch in China put on hold indefinitely,” says Page.
“Instead, to start the year we have placed an order for nine containers of Infapure for shipment in April and we expect to be placing further orders before the end of the year,” he says.
Page believes a key to the company’s success is its business model. Biopure sells its products through a boutique chain of imported milk stores in China called ‘The New Zealand Milk Bar’ founded by Page and wife Jane, a Chengdu native, in 2012.
From their head office in Chengdu, where they employ eight staff, the pair has established 25 New Zealand Milk Bars in 23 cities across six provinces in China. The company acts as importer and exclusive distributor to the stores which Page says enables greater control and allows more value to be captured across the entire supply chain.
The model has already caught the attention of larger operators, including Fonterra, which has struggled to make headway in the Chinese marketplace and have been impressed by The New Zealand Milk Bar’s growth.
“We met Fonterra China president Kelvin Wickham in Shanghai in June last year to discuss the model and from the beginning he floated cooperation as opposed to just arms-length supply.”
Page says they will achieve expansion by working with large partners to tap traditional channels by rolling out a ‘store-in-store’ strategy with supermarkets and baby focused retail chains.
“We’re looking at 1000 New Zealand Milk Bar outlets by the end of 2017 and as dramatic as this sounds, that will barely touch the potential market for infant formula in China,” Page says.
“It was always our plan to work with well-resourced partners at the right time but you can’t rush into a hyper-competitive market like China without proving your point of difference first.
“It’s taken two years of fine tuning our model and navigating regulations but we now have six major partners on board ready to take it national into thousands of locations.”
“It’s hugely satisfying to see it all coming together,” he says.
"I hope the New Zealand Milk Bar retail platform can forge a path to help other New Zealand-owned value-added companies gain exposure in China.”
