Since February, when a contamination scare forced Abbott Nutrition’s plant to close, the US government has been dealing with a major crisis.
To help with the shortage, special market access was given to a number of companies, including a smaller competitor named Bubs Australia. However, a2 Milk was not one of them. In August, it got a letter from the US Food and Drug Administration (FDA) saying that the agency would not look into its request to ship tins any further.
A2 Milk said on Thursday that it now expects its gross margins to be lower than average and its distribution costs to be higher. This is because the company may have to pay more for air freight and rework in the near future, and it will also have to spend more on marketing and trade to get into the category.
The FDA said overnight that a2 Milk could import its a2 Platinum 0–6 months and 6–12 months ranges. Danone (Ireland) will also be able to bring in its Aptamil formulas for Stages 1 and 2.
The FDA said on its website that both products will be sold at major stores in the US.
The FDA also said that special access was given after a review of information about “nutritional adequacy and safety,” which included microbial testing, labelling, and more information about production and inspection at the facility.
The good news sent the share price of the Kiwi company soaring on Thursday. In afternoon trade on the ASX, each share went up 29, or 5.5%, to $5.56. Since May, when it fell just below $4 each, it has been making up some ground.
Even though shipments of formula have arrived in the US, stores are still not fully stocked, according to US media. Officials in charge of the response blame hoarding, supply chain bottlenecks, and manufacturers making less variety.
David Bortolussi, the CEO of A2 Milk, said Thursday that the company has permission to bring tins into the US until January 6, 2023.
Along with Stages 1 and 2, the company can also sell Stage 3 toddler products, which do not need enforcement discretion.
Mr. Bortolussi also said that the product that will be sent to the US has the same ingredients as a2 Platinum, but the scoops, instructions for mixing, and labelling requirements are different to meet FDA standards.
He said that this product is not on the market yet and will need to be made as soon as possible.
Long-term, the US is a big chance for the a2 Milk brand to grow in the formula market, but Mr. Bortolussi said that it is still early days.
“In the near future, and before distribution plans are finalised, sales during FY23 are expected to be up to 1 million cans, all of which will be sold in 2H23, assuming enforcement discretion stays in place during the whole time,” he said.
“Finally, actual sales will depend on what customers want, how much they buy, if there aren’t enough supplies, and how the market is doing at the time.”
When it shows its first-half results early next year, A2 Milk will give an update on its growth in the US market and its sales forecast.
