I'm sure the majority of readers will be very familiar with the likes of A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL).
These two companies have been going gangbusters over the last few years thanks to the incredible sales growth they have achieved due to the insatiable demand for infant formula in China.
But they aren't the only companies looking to strike it rich in this market. Some investors will be aware of fledgling infant formula companies Bubs Australia Ltd (ASX: BUB) and Wattle Health Australia Ltd (ASX: WHA).
They have each signed countless distribution agreements over the last 12 months with some of the biggest names in retail. This has led to their market capitalisations ballooning to eye-watering levels, despite the agreements not yet resulting in a notable lift in sales.
The new challenger.
One infant formula challenger that I'm betting a lot of readers won't be familiar with is Jatenergy Ltd (ASX: JAT).
The China-based energy-related technology marketer stepped into the infant formula market in January when it announced the acquisition of a 51% interest in Golden Koala Group Pty Ltd.
Golden Koala is an Australian milk powder company which markets the Golden Koala Infant Formula product, along with adult full cream and skim milk powder.
Management is hoping to follow in the footsteps of Bubs by signing a distribution agreement for its infant formula with JD.com.
The company is currently in discussions with representatives from JD.com and appears optimistic that a deal will be reached. This would give it access to over 260 million active customers of the JD.com platform.
Should you invest?
I think it is far too soon to invest in Jatenergy and even Bubs and Wattle Health. While all three could potentially replicate a2 Milk's success in the Chinese market in the future, just having products available to these consumers does not necessarily guarantee sales.
Both a2 Milk Company and Bellamy's have spent a lot of time and money creating strong brand images and marketing their products to Chinese consumers. I think this is vital if you want to succeed in such a competitive market. I'm not convinced, as of yet, that the others have the resources to do the same.
