The rollercoaster ride that is the Bellamy's Australia Ltd (ASX: BAL) share price continued again today after the infant formula company provided an update regarding the registration of its products with the China Food and Drug Administration (CFDA).
At the time of writing its share price has tumbled 7% to $4.15.
Today's announcement was about the People's Republic of China (PRC) requirement that by January 1, 2018 all infant formula products manufactured for sale in the country are registered with the CFDA.
Following discussions with Bega Cheese Ltd (ASX: BGA), Bellamy's can confirm that its PRC products can no longer be registered at Bega's Derrimut canning line.
Although Bellamy's continues to review alternatives in relation to obtaining CFDA registration for its PRC products, management doesn't expect that it will have registration in place by January 1, 2018.
This is because of the time required to complete both CFDA registration and up to six months of additional testing of its PRC products at an alternate canning line.
This certainly is bad news for Bellamy's and its shareholders. The Chinese market is seen as a key catalyst for growth, accounting for 14% of its total sales in the first-half.
While Bellamy's has stated that it is actively pursuing strategies to reduce any interruptions to the supply of its PRC products, things don't look great for the embattled infant formula company.
As things stand, it appears as though Bellamy's products will be removed from the shelves of Chinese retail stores on January 1, 2018.
But I suspect this could come sooner and expect there is a chance that retailers could soon sell-off Bellamy's products to reallocate space to products that won't suffer from supply disruptions at the end of the year.
One company that could benefit from this is a2 Milk Company Ltd (Australia) (ASX: A2M). Its progress in the Chinese market has been nothing short of spectacular, and I expect there is still a long way for it to go.
In light of this, I would suggest investors avoid Bellamy's and consider an investment in a2 Milk instead.
