Bellamy's future in China is on the rocks


Bellamy’s Australia has lost its formal registration slot with manufacturer Bega Cheese placing its future of sales of baby formula into China in jeopardy.

From January 1, China will require the infant formula products of the company that are manufactured for sale be registered with the China Food and Drug Administration (CFDA).

The Australian Financial Review questioned the company two weeks ago over the possible loss of the slot with Bega. Bellamy’s said Thursday it can no longer be registered at Bega’s Derrimut canning line and it will miss the January 1 CFDA deadline.

“This delay is due to the time required to complete CFDA registration and additional testing of up to six months of the company’s PRC products at an alternate canning line,” Bellamy’s said in a statement.

Picture: Getty Images

Shares in the troubled Launceston-based company tumbled 33 cents, or 7.38 per cent, to $4.14 by 12noon.

Following its $200 millon deal with its existing customer US giant Mead Johnson, Bega will likely give it two slots, while the third slot will likely go to Blackmores, given it has a joint venture with Bega (that its currently under review), leaving Bellamy’s out in the cold.

There is speculation that the Chinese by the end of year might only allow for two slots per manufacturer, rather than the current three slots anticipated, creating more headaches for the industry.

Trouble ahead

One source said the future of Bellamy’s baby formula sales into China is in trouble.

“The future of Bellamy’s is in the balance with no slot by January 1,” he said.

“They have two issues: they have got to get another slot and the Chinese still have to approve they can use those slots in China. Bellamy’s could be stuck with product coming from partners Fonterra and Bega because it has not got a slot from the manufactures it came from.”

Fonterra chief financial officer Lukas Paravicini last week confirmed to the Financial Review Bellamy’s has a registration slot, and remains an important customer.

Bellamy’s said formula sales into China in the first half was about $16 million, comprising 14 per cent of total sales.

The company has been on shaky ground for months, after it misread sales demand in China last year which resulted in several downgrades to earnings, a collapse in its market capitalisation and firing its former CEO Laura McBain.

Most of the board was ousted in late February by several large shareholders, including Kathmandu founder Jan Cameron, and Bellamy’s is now trying to secure former Virgin executive David Baxby as its new chairman.

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