The ABC network has reported that the Australian Federal Government is in talks with the country's biggest retailers in an attempt to resolve the growing baby formula shortage.
Indeed, Australian-made baby formula has been in red-hot demand in recent years, both locally and internationally. There's been plenty of demand from China in particular given the high level of disconnect between parents and Chinese manufacturers due to a number of food health scares in years gone by.
However, that demand has escalated even further over the last few weeks to dominate news headlines. Parents have struggled to get their hands on high-quality brands – a fact that is mostly attributed to Chinese individuals (known as 'daigou') who buy the products locally, and then sell them online to residents in China for a significant premium.
Indeed, Bellamy's Australia Ltd (ASX: BAL) believes that up to 40% of the products it sells locally are purchased on behalf of foreign customers with the company facing massive demand compared to what it can currently supply.
More recently, this may be due to China's scrapping of the decades-old one-child policy or, more likely, the massive 'Singles Day' online shopping event in China yesterday. The event reportedly generated more than US $14.3 billion worth of sales (AU $20.1 billion).
Indeed, supermarket chains such as Woolworths Limited (ASX: WOW) and Coles, owned by Wesfarmers Ltd (ASX: WES), have introduced limits regarding how many tins of baby formula a customer can buy per transaction. But various complaints that have been made online, and broadcast via various media sources, suggest those policies are not being properly enforced.
According to the ABC, Assistant Trade Minister Richard Colbeck said he was investigating a solution, saying "Booming international demand for our high-quality dairy products is great news for our local dairy industry, but we must also ensure supply is available locally."
He also said he had been talking to pharmacy and supermarket representatives regarding ways they could resolve the issues.
The demand certainly is good for the suppliers, however. Bellamy's share price has soared recently while Blackmores Limited (ASX: BKL) is also keen to get in on the action. Although Bellamy's shares mightn't seem cheap on a historical basis, the enormous demand for its products (and a huge avenue for growth) could still make it a good buy today.
