a2 Milk Company Ltd (ASX: A2M) shares could trade sharply higher today following an announcement put out by the company.
The a2 Milk Company is one of Australia and New Zealand’s largest infant formula producers and the leader in a2-only protein-based dairy products. It has operations in New Zealand, Australia, USA and China thanks to key supply and distribution agreements.
What’s Going On?
In 2019, the Chinese government will change the way local and international English-label products are sold into China.
As Rask Media reported in September, China’s new cross-border consumer protection laws were not yet fully understood by consumers or businesses.
But in its statement today, a2 Milk said it welcomes the Chinese Government’s interpretation of the new cross-border e-commerce (CBEC) laws.
According to a2 Milk, the interpretation of the law will see large companies transacting across e-commerce and cross-border platforms fall under the framework.
Amongst other things, these companies must ensure their English-labelled products are labelled correctly and within the rules of the country of origin, and they must produce Chinese translations. Consumers must also be aware of these rules when purchasing.
The new laws come into effect in January 2019 but the industry has a ‘grace period’ until 31 March 2019.
“The Company and its major trading partners selling English label products to Chinese consumers are confident all requirements will be met on or before 31 March 2019,” a2 Milk’s statement read.
In 2018, a2 Milk generated ~NZ$234 million of sales from China and Asian markets – equivalent to 25% of group revenue. However, in my opinion, the actual number could be much higher than that already. Further, the Chinese market’s importance will grow over time given the significant potential of the Asian market.
Therefore, this seems to be yet another positive announcement from Australia’s leader in a2-only protein milk.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).