Bellamy’s Organic owner China Mengniu breached FIRB rules, says former CEO Tarsi Luo

The former chief executive of Bellamy’s Organic has accused the infant nutrition company’s Chinese owner of breaching foreign investment rules and overseeing ageist and sexist practices.

Tarsi Luo was dismissed from Bellamy’s in August after complaining that her pay was less than one-third of her male predecessor. She also says that the company’s owner China Mengniu may have breached FIRB rules.

The former chief executive of Bellamy’s Organic has accused the infant nutrition company’s Chinese owner of breaching foreign investment rules and overseeing ageist and sexist practices.

Tarsi Luo, also known as Xiao Luo, claims she was fired in August after she com­plained about a gaping gender pay gap and warned the company about adhering to its Foreign Investment Review Board obligations.

China Mengniu acquired Bellamy’s in 2019 for $1.43bn, resulting in its delisting from the ASX.

FIRB approved the takeover on the condition the majority of directors at Bellamy’s were Australian resident citizens.

But Ms Luo, in documents filed with the Federal Court, alleges she reported to and was managed by Yan Luo, head of business development at China Mengniu, and not to Bellamy’s local directors.

Mr Luo “commenced directing and managing Tarsi’s direct reports” and “held strategic meetings with staff of (Bellamy’s) in March 2022 and excluded Tarsi from those meetings”, it is alleged.

Mr Luo, Ms Luo alleges, is not a resident or citizen of Australia. In June, she claims, Ms Luo provided legal advice received by Bellamy’s in relation to the FIRB conditions and warned Mr Luo that the company could be in breach of them.

Shortly thereafter, Ms Luo was told all changes to salaries for Australian staff would need the approval of China Mengniu’s vice-president of human resources, the Federal Court documents allege.

Ms Luo, who is represented by Maurice Blackburn principal lawyer Josh Bornstein, separately alleges she was paid less than a third of her predecessor in the position of chief executive, Andrew Cohen.

She did not receive a long-term incentive payment – which would have lifted her $330,000 base salary to $632,068 – after Mengniu set “unrealistic and unachievable” revenue and profit targets, Ms Luo alleges in the court documents.

Andrew Cohen, Tarsi Luo’s predecessor as chief executive at Bellamy’s. Picture: David Geraghty

Ms Luo complained about this conduct to Lijun Liu, China Mengniu’s vice-president for human resources, who allegedly dismissed those concerns, telling her that the salary would be lower because she was “very young”. Age and background, among other factors, were considered when determining salary, Ms Luo claims she was told.

“Tarsi responded with words to the effect that ‘this is Australia, and it would be appreciated if market rates were paid’ and Lijun Liu responded with words to the effect that ‘you do not understand China Mengniu culture’,” the filings read. Ms Luo was 37 and 38 during her time as chief executive.

In March, one month after that conversation, China Mengniu announced a 3.5 per cent pay rise for all Bellamy’s employees, except Ms Luo. She complained to Mengniu in a meeting about her exclusion from the pay rise and said her “salary was inadequate for her level of responsibility” “During that meeting, Yan Luo responded by saying that she is ‘young’,” the Federal Court document reads.

Bellamy’s was listed on the ASX and counted businesswoman Jan Cameron, the former owner of the Kathmandu retail empire, as its largest investor.

But its share price slid in the months before the takeover offer from China Mengniu, after the infant formula producer repeatedly failed to secure the required approval to continue exporting into the Chinese market. That put it at a major disadvantage compared to larger producers including A2 Milk, a company with a market valuation of more than $4.7bn.

The takeover by China Mengniu was approved by then treasurer Josh Frydenberg, who said it would “ensure Bellamy’s can continue to support jobs in Australia and strengthen its ability to expand its domestic market as well as its export opportunities”.

China Mengniu acquired Bellamy’s in 2019 for $1.43bn, resulting in its delisting from the ASX. Picture: Peter Hemphill

There were three conditions – that most of Bellamy’s directors be Australian resident citizens, that its headquarters remain local for a decade, and there was at least $12m in investment in infant milk formula processing facilities in Victoria.

“The conditional approval demonstrates our foreign investment rules can facilitate such an acquisition while giving assurance to the community that decisions are being made in a way which ensures that Australia’s national interest is protected,” Mr Frydenberg said at the time.

Since that time, Bellamy’s has also gained access to the lucrative US market, making it the first partially state-owned Chinese entity to be able to export there. Chinese state-owned Cofco, the country’s largest food processor, manufacturer and trader, is a major shareholder in China Mengniu.

The Federal Court documents also outline the ambitious growth plans for Bellamy’s, with Ms Luo alleging her short-term incentive payments were set against a 350 per cent growth target – or some $600m in real terms – for 2022. She says that target was reduced to $238m, but was unachievable.

Ms Luo is suing the company for past economic losses of at least $341,000 – including the difference between the salary paid to her and the salary of her male predecessor, as well as the value of the long-term incentive grant.

She is also claiming medical expenses of at least $5000, future economic loss, and $80,000 in damages for “humiliation and distress”, the documents show.