THE infant formula partnership between Blackmores and Bega Cheese (PD 30 Oct 2015) has failed to meet sales expectations in Australia or China, with Bega's share price yesterday falling 20% after the "change in market circumstances" was revealed at the firm's annual general meeting.
Bega chairman Barry Irvin said the company would write down its share of the milk powder joint venture inventories by up to $7 million, after "significant change in the nutritionals market" since the first joint products launched in Jan.
"While this time last year supermarket shelves were empty and customers in Australia and internationally were providing ever increasing orders, the combination of a regulation change in China, a supply response to the demand signals and the evolution of supply channels to market now sees significant discounting in the market place and signs of short term oversupply," he said.
The joint venture combines Bega's manufacturing expertise with Blackmores' strengths in brand development, but sales have not materialised at forecast levels, with Irvin citing "strong head winds for the partnership, particularly in the Australian market".
Irvin said the Bega-Blackmores business was under "constant review," with performance being monitored "as market evolution and circumstances become clearer".
A further update is expected tomorrow at the Blackmores AGM.
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