TRANS-TASMAN dairy company a2 Milk is considering building its own infant formula plant in Australia as it struggles to keep its Platinum-branded product on supermarket shelves.
Australia is in the midst of a baby formula shortage ahead of the world's biggest online shopping day, China Single's Day on Wednesday.
Fairfax Media revealed on Sunday that many people were clearing Australian supermarket shelves, buying trusted infant formula brands such as a2, Bellamy's Organic and Karicare, and reselling them online for a handsome profit in China.
Peter Nathan, chief executive of a2 in Australia, said the company was delighted that its Platinum brand has become desirable in China, but it needed to ensure it could meet demand.
Mr Nathan said the company had been exploring a range of options including building its own infant formula factory in Australia to striking a partnership with a local milk processor to produce it under contract.
Currently, all Platinum infant formula is produced by Synlait in New Zealand. An Australian presence would complement that deal, Mr Nathan said.
"Clearly we have got to make sure we have supply," Mr Nathan said, adding that producing under contract would be a more viable solution in the short term.
Murray Goulburn managing director Gary Helou said at the company's annual meeting last month that its plants were running close to full capacity. But the co-operative would spend $260 million to $300 million in the next 12 months to expand its nutritional powder operations, providing it secured enough customers to make the investment viable.
Infant formula has proven to be fertile ground for driving corporate activity. A partnership between vitamin maker Blackmores and Bega Cheese to produce baby formula sent Blackmores' shares surging past the $200 mark.
Such is the demand for the product that it is beginning to reshape a2 from being known as dairy food and beverage business to predominantly an infant formula operation.
The company's revenue surged 40 per cent to $NZ155 million ($143.5 million) in the 12 months to June 30. This was largely due to its infant formula sales soaring 445 per cent.
Mr Nathan said the company had the capacity to source more milk from cows carrying only the a2 protein to help meet the infant formula demand.
"We can ramp up our herd production and go through the rigorous testing process," he said.
The company is forecasting "strong growth" in revenue and operating earnings in the 2016 financial year, assuming demand for infant formula in Asia and Australia continues unabated.
