Is Blackmores Limited struggling to enter the infant formula market?

Blackmores Limited (ASX: BKL) has seen its share price fall as low as $150.06 earlier this morning, on news reports that its new infant formula products are being shun in favour of other producers.

The share price is currently down 4.2% at $151.44 just over an hour into the trading day.

According to data from Aztec Data obtained by the Australian Financial Review (AFR), Murray Goulburn (MG) and Blackmores have secured less than 0.1% of the market.

MG sold an average of just 46 of its NatraStart infant formula in chemists and supermarkets for the week ending May 8, according to Aztec Data. That adds to the woes the company already faces, after cutting milk prices and its profit outlook – forcing its listed unit MG Unit Trust (ASX: MGC) share price to sink as low as 82 cents on May 15, from above $1.20 earlier in the month.

MG Unit Trust price is down 1.5% at 99 cents.

Sales for Blackmores infant formula, which was only launched in January 2016, came in at 570 units for the period. Aztec Data shows Blackmores had averaged weekly supermarket sales of 237 units in the month to May. Total weekly sales in the category are over 419,000.

Source: Blackmores

Source: Blackmores

The AFR reports that many buyers of Australian infant formula for Chinese consumers – known as Daigou – see Blackmores as a vitamins company, not an infant formula specialist.

Among Chinese consumers, the most popular infant formulas are New Zealand’s Karicare, A2 Milk Company Ltd (Australia) (ASX: A2M) a2 Platinum and Aptamil, then Swiss product Wyeth and Bellamy’s Australia Ltd (ASX: BAL) Bellamy’s Organic.

Blackmores CEO Christine Holgate has told the AFR, “Blackmores is pleased with the warm response we’ve had from mums since launching our infant nutrition range and we are continuing to roll out distribution“. That perhaps suggests that it may be far too early to judge the success or otherwise of Blackmores’ entry into infant formula.

It may take a number of years for Blackmores to build its brand here in Australia and for consumers to adopt its infant formula. That may be the trigger that spurs solid demand in China.

Foolish takeaway

I’ve learnt not to underestimate Blackmores and its management team, after repeatedly getting the company wrong. I suspect the market and the AFR may be judging Blackmores a little bit too early.

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Motley Fool contributor Mike King owns shares of Bellamy's Australia. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia owns shares of Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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