The A2 Milk Company Ltd (ASX: A2M) released a market update Monday morning in response to changes in Chinese regulation regarding e-commerce sales, known as Cross Border E-Commerce (CBEC).
Australian infant formula companies like a2 Milk, Blackmores Limited
(ASX: BKL) and Bellamy’s Australia Ltd (ASX: BAL) have identified China as a key growth market, with some of their products reaching Chinese consumers online, in-store or by direct mailing.
In an announcement to the ASX, a2 Milk noted the recent regulatory changes with regards to China’s domestic and CBEC sales channels. On August 31st a new law was passed in China and comes into effect at the end of this year, although its implementation is not yet fully understood.
“This framework is broad in scope and will apply in respect of all e-commerce activities, both domestic and cross border (CBEC),” a2 Milk Company noted in its public filing.
The company said more details will be released by Chinese authorities in coming months, despite the regulatory ‘grace period’ ending at the beginning of 2019.
a2 Milk Company was light on details but the company said it, “operates a flexible multi-channel multi-product strategy” and “will continue to work proactively with its partners to respond to the new e-commerce law.”
China Store Rollout
In August, a2 Milk Company reported a 115% rise in full-year profit thanks, in part, to growth in the company’s Chinese footprint. a2 Milk Company formula could be found in 10,000 Chinese stores, the company said at the time.
“Significant progress has been achieved in Australia, China and the USA and important emerging market opportunities are starting to materialise,” a2 Milk’s CEO Jayne Hrdlicka said.
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