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Slowing China Demand Hits New Zealand’s a2 Milk Profit

Company says falling birth rates are cutting demand for infant milk formula, but the trend is different across cities.


Farm Fresh
A dairy cow stands in a barn. Farm Fresh plans to export to Hong Kong, Indonesia and the Philippines. Photo: Reuters.

 

New Zealand’s a2 Milk announced profit fell 53.3% in the first half of its fiscal 2022 year, as it continued to lose market share in China for its infant milk formula (IMF) product.

The statement outlined that China’s IMF market is rapidly changing, in particular due to falling birth rates. The company said in the announcement that its data showed an 18.1% decrease in births in China in 2020 and a further 11.5% decrease in 2021.

The falling birth rate pushed down volume in China’s overall IMF market 5.0% in the first half, especially early-stage products such as IMF, according to the company. Increased competition and promotions also cut into pricing power.

The company also reported results varied across cities. A-level cities saw total market value fall 6.6%, while in B, C and D-grade cities market value was broadly flat, reflecting that birth rates are falling more quickly in top-tier cities.

The dairy producer posted first-half net profit after tax of NZ$56.1 million ($37.54 million), down from NZ$120 million a year ago.

China buys some 44% of New Zealand’s milk exports, according to Xinhua.

 

  • Neal McGrath

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Neal McGrath

Neal McGrath is a New York-based financial journalist. Neal started his career covering the Asia-Pacific region for the Economist Intelligence Unit, then joined Asian Business magazine. He's subsequently held a variety of editorial positions covering business, economics, finance and sustainability. Neal has lived and worked in Hong Kong, Singapore, Germany and the US.