The Bellamy’s Australia Ltd (ASX: BAL) share price has jumped 16% in quick response to some news from China.
Bellamy’s is an ASX-listed organic infant formula and organic food company that was founded in 2004 in Launceston, Tasmania. It was the first company to offer an organic infant milk formula range to Australian mothers. It is now becoming a growing presence in the large Chinese market.
Why The Bellamy’s Share Price Is Rocketing
Bellamy’s announced that it has received State Administration for Market Regulation (SAMR) approval for Bellamy’s new branded formula series which will be produced at the ViPlus Dairy facility in Toora, Victoria.
However, this is not the approval of the existing SAMR application to produce the Bellamy’s organic series at Camperdown Powder – this application is still ongoing.
The new Bellamy’s ViPlus products is part of a plan to build a tiered-product portfolio and win more of the offline channel Chinese market with an initial focus on Tier 3 and Tier 4 Chinese cities, being the smaller cities.
Bellamy’s reported that initial interest and feedback from sub-distributors is strong (which probably refers to daigou) because of the strength of the Bellamy’s brand, the fact it is made in Australia and the ‘premium’ formulation.
The infant formula business will transition to selling the new SAMR registered series of ViPlus as soon as further artwork amendments have been proved.
Bellamy’s CEO Andrew Cohen said: “This is the first step in recommencing sales in the China offline channel and executing a multi-tier product strategy. It will position us well to compete in the critical battleground of Tier 3 and 4 cities.”
The existing Bellamy’s organic series remains in progress for SAMR registration and is targeted at Tier 1, 2 and 3 cities.
Bellamy’s will invest between $4 million to $6 million, depending on performance, to transition the product and to secure long-term production with ViPlus, which includes competitive pricing for blending & canning and a minimum annual volume commitment.
Time to buy Bellamy’s shares?
Whilst this is of course positive news for Bellamy’s I would suggest that the champagne shouldn’t be fully flowing until SAMR registration has been approved for Bellamy’s main organic products.
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At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.