A significant decline in China’s birthrate has led to a sharp drop in the value of baby formula producer a2 Milk.

As a key market for dairy products from Australia and New Zealand, China’s baby formula sector is crucial to the industry’s success.

China’s birthrate drop affects a2 milk market

Both countries are known for producing high-quality products due to their pristine environments and ample grasslands. However, China’s fertility rate plummeted from 1.81 in 2017 to 1.09 in 2022.

a2 Milk’s CEO, David Bortolussi, stated that the infant milk formula market in China has faced challenges due to lower birth rates and heightened competition.

The company noted that China’s infant milk formula market contracted by 14% during the 2022-23 fiscal year. a2 Milk operates in China through direct sales and ‘daigou’ purchases, where products are bought in Australia and sent back to China by individual exporters.

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The latter declined significantly by almost 40%, with a limited rebound anticipated.

Despite a 10% rise in revenue for the year ending June 30, a2 Milk’s shares plunged to $4.27 following the news, causing its total value to drop to $3.08 billion, a decline of $480 million from the previous valuation of $3.56 billion. Shares have since partially recovered to around $4.45.”