Border closures, Vic lockdown hits a2 Milk’s China ‘personal shopper’ market

Lockdowns in Victoria and international border closures have decimated the Chinese “personal shopper” market for a2 Milk’s baby formula.

Daigous – personal shopper for customers in China – snap up large volumes of baby formula. Picture: Chloe Smith

Border closures and lockdowns have hit a2 Milk’s baby formula sales as it misses out on “personal shoppers” who send it back to China.

The New Zealand-based company’s shares plunged more than 10 per cent after it reported lower than anticipated sales to daigous – people who go overseas to buy products, then resell them back home – so far this financial year due to reduced tourism from China and international student numbers.

A2 Milk said the daigou market represented a significant proportion of its infant formula sales, so it expected first half revenue to be “materially below plan”.

Contributing to lower sales were consumers de-stocking their pantries after hoarding in the March quarter as the pandemic took hold and the stage 4 lockdown in Victoria.

Daigous buying infant formula and shipping it to China often cause supply shortages, prompting stores to implement purchase limits. Picture: Alex Sampson

The company said, however, the underlying strength of its infant milk formula brand in China and the rest of its business was healthy, and it expected a better overall second half performance.

“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,” chief executive Geoffrey Babidge said in an update to the Australian Securities Exchange on Monday.

“Performance in all other areas of our business is strong, including our liquid milk businesses in Australia and the USA.

“Importantly, our local China business is performing strongly, notably in mother and baby stores, which we anticipate will continue.”

A2 Milk has forecast first-half revenue of $NZ725 million ($A674 million) to $NZ775 million ($A720 million), down from $NZ805 million ($A748 million) for the previous corresponding period.