China’s finance ministry imposed a new 11.9 per cent tax on foreign goods bought via the internet earlier this month.
It also announced a «positive list» restricting the types of products that could be allowed to pass through lucrative e-commerce channels.
«The recent changes have only just come in, so it’s new territory,» a2 chairman David Hearn told Fairfax Media in Beijing. «Infant formula and a2 Platinum in particular are on the positive list, so there is no threat to our ability to distribute in this country.»
Grey market boom
Like other Australian dairy and healthcare brands, such as Bellamy’s Organic and Blackmores, a2 has also experienced a huge surge in brand awareness and demand in China through grey market channels including online vendors – known as daigou – operating on social media apps like WeChat.
But a crackdown on the popular practice in both Australia and China, as well as the new tax, is likely to see delivery costs rise as those involved with daigou begin to package goods in smaller shipments to circumvent the tighter checks.
«Frankly we are already a super-premium product and we sell on the unique benefits of the product, not the price,» Mr Hearn said.
«We anticipate there may be some small bumps in the road, but we are not anticipating a major change to our business or our growth.»
Analysts, however, say foreign companies need to move towards direct sales and marketing on the mainland because of efforts of Chinese authorities to quash the grey market.
Lactose intolerance
In China this week a2 is promoting new results of a clinical trial it says goes some way to prove its claims that lactose intolerance – a common complaint among East Asian populations – only occurs with conventional milk with A1 protein, and not A2.
The trial, which was funded by a2, was carried out by academics from Shanghai Jiao Tong University and the John Hopkins University School of Medicine. The sample of 45 participants who had lactase deficiency or lactose intolerance showed markedly fewer symptoms when on a2 milk compared to conventional milk products.
Educating the Chinese market about a2’s differentiated product, Mr Hearn said, was a fundamental part of the company’s strategy in China, where total revenue surged 340 per cent to $73.9 million in the six months to December.
«It’s giving more substance to the proposition; it gives our whole reason for being more robust,» Mr Hearn said.
Source: SMH