In a notice sent to Bellamy’s board, Black Prince Private Foundation, which holds a 14.48 % share of the company, seeks to remove independent, non-executive directors Patria Mann, Launa Inman, Michael Wadley, and Charles Sitch, and to replace them with Jan Cameron, Chan Wai-Chan, Vaughan Webber, and Rodd Peters, who is also an authorised representative of Black Prince.
It comes after last month’s dropping of share prices, and the company’s voluntary suspension from trading its shares in the Australian Securities Exchange (ASX), both largely prompted by China’s new infant formula regulations
Of this latest development, Bellamy’s chairman Rob Woolley said that while the company respects the rights of the shareholders to requisition resolutions, Bellamy’s does not consider this proposal to be in the best interests of all shareholders.
“I support my fellow directors in opposing the proposal from Black Prince, which is an unwanted distraction for the board and senior management as we work towards lifting the suspension of trading in Bellamy’s shares,” Woolley said.
The company’s woes started last December when its shares initially tumbled by more than 40% as it experienced a “temporary volume dislocation until regulatory registrations are completed in China”.
In October 2016, the China Food and Drug Administration (CFDA) enforced a formal regulation on formula registration of infant formula milk powders, allowing each milk powder manufacturer such as Bellamy’s to produce five categories of infant formula, with each category consisting of just three products – all of which needs to be registered.
This created an “industry-wide de-stocking and downward prices pressure” amongst milk formula brands in China, including Bellamy’s offerings. Also, despite its AUD$93 million worth of revenues for Single’s Day, one of the major online Chinese sales event last year, Bellamy’s managing director Laura McBain reported that the revenue still “fell short of expectations”. Other news said waning popularity of Bellamy’s products among the Daigou shoppers – China’s online traders who recommend and ship products to family and friends in China, contributed to product sales decline.
Imported milk formula brands became popular in China following the 2008 Melamine scandal, where melamine-tainted products from local firm Sanlu caused the death of six babies and illness of 300,000 infants. This sad event saw an opportunity for foreign brands to enter China’s infant formula market.
A raft of infant formula firms have reported sales slumps and profit warnings in the wake of the new regulations. Despite the short-term impact, most industry analysts expect the measures will boost international firms in the long-run as they will prevent local outfits from flooding the markets with multiple brands, many of which are suspected of containing the same product.