Bortolussi said the daigou phenomenon was effective in building up the brand up until Covid-19 struck, when international air travel was suddenly suspended.

As it stands, NZX-listed Synlait Milk makes all the company’s formula, but that will soon change.

Bortolussi is quick to point out a2 Milk has a good relationship with Synlait, which he expects to remain a key supplier in the years to come.

“However, for market access reasons to grow in China, it’s been a priority for a2 Milk to go from one brand to multiple brands, plus building nutritional manufacturing capability,” he said.

“It’s broader than just manufacturing – it’s innovation, product development, research and development, intellectual property protection and everything that goes with that.”

A2 Milk is the only global top-10 formula company to not have its own manufacturing supply base.

It’s been the company’s plan for a number of years to rectify that, led by chief supply officer Chopin Zhang, a former CEO of Yashili International, who joined a2 Milk in 2022.

“Having that leadership in place is really important and then, over the last 18 to 24 months, we’ve been investing heavily in building capability on product development, quality control, regulation, procurement to build that capability here in Auckland.”

The once-small Auckland team now take out a whole floor.

Chair Pip Greenwood said it’s been a process.

“It was apparent that Synlait was basically the holder of the intellectual property and we couldn’t develop further products without having that capability ourselves,” she said.

“So it’s not just about the manufacturing, it’s the whole suite,” she said.

The purchase of Yashili NZ gives a2 Milk two existing China label products, which allows a2 to play in different tiers, she said.

Bortolussi said the existing Yashili NZ labels that will be made using the A2 beta protein milk and the brands will be relaunched in the short term.

“Then over the medium term – we’ve already started working on this – is to reformulate those products.”

China’s regulations say there are only three lots for infant formula manufacturing per site, so there is room for a third one at Pōkeno.

“So we’re working on the longer-term product development of those products to bring to market in 2029, 2030, which will be closer to our optimal portfolio that we want.

“We have to work with what we have at the moment and then we’ll optimise it.

“So it’s a step up now and then again as we step up to our optimal portfolio.”

Bortolussi said a2 Milk’s profitability should start to accelerate in 2027 and 2028.

There was a possibility of doing another China label with Synlait but half its Platinum English label business will shift from Synlait to Pōkeno.

He says that even though the birthrate in China was declining, there was still demand for international premium brands.

“There are consumers, no matter what their demographics are, who are willing to invest in premium brands, whether they be cross-border international brands or local domestic brands as well.

“Chinese families, mothers, the whole family, invest a lot in this category and they want the best products.”

Tāiko listing?

Tāiko Critical Minerals, a West Coast-based critical minerals company, is planning to list on the NZX early next year.

The company says it has the resource consents required to extract and process high-grade mineral resources at Barrytown, and to produce high-value-add critical minerals.

The “rehabilitative mining” project will produce heavy mineral concentrate (“HMC”) from 64ha of privately-owned farmland at Barrytown.

The HMC will be trucked to the company’s mineral separation plant at Rapahoe, where critical minerals comprising ilmenite, garnet, zircon, rutile and rare earth element concentrates will be produced, the company said.

It said the critical minerals will be transported to Lyttelton and Timaru for export to the global market.

Gentrack rebounds on outlook

Gentrack’s NZX-listed shares jumped from $7.83 going into its full-year result, reported on Monday, to $10.34 by mid-Thursday trading, after its full-year result fell short but its pipeline impressed.

Despite the 32% jump, the stock is still off the $14.45, 52-week high it hit in February.

Shares dipped earlier this year as analysts pointed to Gentrack losing business to competitors. Craigs’ Joshua Dale noted in May that billing software rival Kraken “is starting to encroach on Gentrack’s turf” and downgraded the firm from overweight to neutral.

Once Octopus Energy’s in-house solution, Kraken is now being marketed as an “AI-enabled” system for other power companies, too.

A July announcement that Meridian had chosen Kraken over Gentrack helped push Gentrack shares towards their 52-week low.

At about the same time, Morgan Stanley noted that Red Energy – a hero Gentrack customer across the Tasman – had named Kraken as a preferred supplier.

With its full-year result delivered on November 24, Gentrack reported revenue that was up 7% to $230m but still slightly shy of Forsyth Barr’s estimate.

Earnings before interest, tax, depreciation and amortisation (ebitda) increased 18% to $28m but were also short of analyst expectations.

But Gentrack says it is the preferred vendor of three prospects, has been shortlisted by three firms and is in the hunt for four more new contracts.

In a November 25 note, Forsyth Barr’s James Lindsay upgraded Gentrack from neutral to outperform, but trimmed his 12-month target price from $12.00 to $11.80.

“The disclosure of 10 pipeline opportunities representing about 30 million meter points was the key piece of new information,” Lindsay said.

In a note the same day, Craigs’ Dale maintained his neutral rating and cut his target price from $10.45 to $10.35.

Dale also highlighted the pipeline of potential new customers, which estimated to represent annual recurring revenue of $136m.

But he qualified that: “We have seen examples in the past where Gentrack has held the position of preferred vendor but struggled to convert.”

– additional reporting by Chris Keall