Own A2 Milk shares? Here’s how the company is battling to rebuild lost daigou sales

Young girl drinking milk showing off musclesYoung girl drinking milk showing off muscles

A2 Milk Company Ltd (ASX: A2M) shares climbed last month, despite one major daigou customer reportedly cutting ties.

The baby infant formula company’s share price lifted nearly 12% since market close on 1 July to end the month at $4.90. For perspective, the S&P/ASX 200 Index (ASX: XJO) gained 7% in the same time frame.

Let’s take a look at what is going on with A2 Milk.

What’s going on at A2 Milk

A2 Milk has lost one major corporate daigou customer, however, this is not stopping the company exploring other avenues to export its product.

‘Daigou’ refers to people or groups who export luxury goods, including infant formulas, from outside China to customers in China.

Wenjun Zhang was previously A2 Milk’s top customer, according to the Australian Financial Review, but has not bought any product since March.

However, A2 Milk CEO David Bortolussi outlined how the company is rebuilding. In comments cited by the publication, he said:

During the past year, we have increased our direct engagement with the daigou community, provided more marketing support and seen an increasing number of daigou representing our a2 Platinum brand.

Consistent with our growth strategy communicated to the market last year, we are simplifying and delayering our English Label infant milk formula distribution network.

On Tuesday, A2 Milk shares shot up more than 7% amid speculation the US Food and Drug Administration (FDA) would approve A2 Milk to sell infant formula products in the US. However, in an announcement to the market, A2 Milk said:

The company wishes to confirm that while we have been informed by the FDA that our application is under active review, at this stage there is no certainty as to the outcome of the application or the timing of any approval.

Share price snapshot

A2 Milk shares have lost almost 17% in the past year and more than 9% year to date.

For perspective, the ASX 200 Index has dropped around 6% so far in 2022.

A2 Milk has a market capitalisation of about $3.6 billion based on the current share price.

The post Own A2 Milk shares? Here’s how the company is battling to rebuild lost daigou sales appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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