In the early morning of September 16, Mengniu Dairy issued an announcement saying that on September 15, it signed a "Deed of Implementation" with Bellamy, an Australian manufacturer of organic infant formula and baby food, and recommended that it be 1.46 billion Australian dollars (about 7.86 billion Hong Kong dollars) ) For a total consideration of all Bellamy's planned shares. Mengniu Dairy is expected to provide financing for the acquisition through internal funding combined with bank financing.
The reporter noticed that after Mengniu's milk powder business turned a profit in 2018, the high-end and even ultra-high-end milk powder market is becoming one of the main development directions of Mengniu, and this has become one of the reasons for Mengniu's acquisition of Bellamy.
For Bellamy, this acquisition may be an important destiny. Dairy expert Song Liang told reporters that Bellamy's recent poor performance has not only been due to the failure to obtain registration of infant formula in China, but also to be favored in the traditional purchasing circle. In Song Liang's opinion, with the help of Mengniu in the future, Bellamy is expected to get milk formula registration more quickly, and the market and sales channels will be further opened.
Mengniu continues to boost organic milk powder market
For Chinese consumers, "Internet red milk powder" seems to be their first impression of Bellamy, and Bellamy also became one of the most popular milk powder brands in cross-border e-commerce. According to the brand's official website, Bellamy was founded in 2004 by a mother of Tasmania named Dolly Bellamy, and the company's shares have now been listed in Australia.
According to Bellamy's recent announcement, as of June 30, 2019, the company's net assets were approximately A $ 232.3 million. From this point of view, Mengniu's acquisition of Bellamy this time can be described as a premium.
Bellamy's Chairman John Ho said that the premium in the proposed plan is 59% higher than the company's current share price , which reflects the strength and transformation of the Bellamy brand.
This acquisition of Bellamy's may further reflect the company's layout for the high-end and organic milk powder industry. Mengniu Dairy stated that Bellamy is a global leader in organic infant formula, with strong brand awareness and considerable profitability. One of Mengniu's major growth strategies is to achieve breakthrough growth in the high-end infant formula sector. In addition, Bellamy's international scope of operations is consistent with Mengniu's short-term focus on expanding markets such as Southeast Asia and Australia.
Just before announcing the acquisition, Mengniu's announcement to exit Junlebao caused a sensation in the dairy industry. According to the Securities Daily report, Mengniu has disclosed that the positioning of Junlebao's basic products has not adapted to the development speed of Mengniu in the field of high-end milk powder, and its net profit margin has begun to drag.
Between selling and buying, Mengniu's determination to make efforts in high-end milk powder seems more obvious. In the milk powder business, Mengniu holds about 51% of Yashili's shares, and many of its brands are also positioned in the high-end and above markets.
In addition, organic milk powder, as an ultra-high-end category in domestic milk powder, has also become a new battleground for dairy companies to compete. Song Liang analyzes that Mengniu will now have two organic milk powder brands, "Baby and Me" and "Swiss Feed", and both have better market performance. From this point of view, Mengniu's acquisition of Bellamy is actually a further increase in the organic milk powder industry.
Song Liang further stated that with the decline in the birth rate and the escalation of consumption in China, milk powder consumers will undoubtedly pay more attention to the added value of the products. Therefore, the high-end or ultra-high-end market represented by organic milk powder will definitely become the future development of the milk powder industry trend.
Bellamy's performance suffers
The reporter combed and found that until 2018, Mengniu's milk powder business segment got rid of the slump for several consecutive years and turned a profit. Among them, the development of high-end and integrated channels has become the main reason.
In this context, Mengniu no doubt holds great expectations for Bellamy. The announcement shows that Mengniu Dairy will fully support Bellamy's continued development of the existing market and assist it to fully explore markets such as China.
For Bellamy, although it enjoys a certain reputation in the field of organic milk powder, before this marriage with Mengniu, the company was facing a decline in performance and an "embarrassing" identity in the Chinese market.
According to Mengniu's Bellamy's account information, the company's net profit for the 2019 fiscal year was A $ 21.7 million, a decline of more than 49% year-on-year. According to Bellamy's recent fiscal year 2019 report, during the reporting period, the company's operating income was $ 266 million, a decrease of nearly 20% year-on-year. Among them, China's formula has not yet been registered, which has led to the company's unfavorable expansion in the Chinese market becoming the most important reason.
In early 2018, China officially started the registration of infant formula. Although Bellamy had submitted an application at the end of 2017, it has not yet been approved. In addition, Bellamy ’s broader sales channels in the Chinese market may mainly rely on cross-border e-commerce or so-called cross-border direct mail.
In this regard, Bellamy has stated in the annual report that both channels are regulated by the Australian and Chinese governments, so there is greater uncertainty. Fortunately, Mengniu's helping hand re-launched Bellamy's expectations for the Chinese market.
According to the information provided by Mengniu to reporters, with the help of Mengniu's brand accumulation and marketing resources, Bellamy will bid farewell to the former "net celebrity" route, and go all out in China's online and offline channels with a more "regular army" style. In addition, Bellamy will share Mengniu's nationwide service network, bringing changes to Bellamy in terms of after-sales service and consumer communication capabilities.
Song Liang said that after being acquired by Mengniu, Bellamy's possibility of obtaining infant formula registration will also be very high.