Six months ago, organic baby-food company Bellamy’s was flying the flag for a new Australian economy. Australia’s reputation for healthy, clean food was going to pick up the commodities slack as China’s growth transitioned from infrastructure to consumption. Yet just a few weeks after the company’s first profit downgrade caused the share price to halve, Bellamy's is in another trading halt. What has happened to the great Chinese consumption story? Almost by definition, a strong brand is one that has been around a long time and has a permanent place in its customers’ psyche. China’s economy is so new and changing so fast that very few brands have been able to establish themselves. Asia will have plenty of established local brands in a few decades’ time. Indeed, Australian food brands like Bellamy's may well have a place. For every company that manages to reach the peak, though, there will be hundreds that get a foothold only to tumble back down. It is almost impossible to pick the winners today. Indeed, the victors might not even exist. (VIEW LINK)
Starting Forager Funds in 2009, Steve has grown the business to over $370m of funds under management. Offering an Australia and Global equity Fund, Steve focuses on long-term value investing of unloved and undervalued companies.
On the contrary it is easier to pick the winner than you think. It is the Chinese powerbrokers. They who have faithfully served and protected the food supply needs of the people for 2,700 years. Milk, infant formula, supplements- food security is the main game. A good place to get context is to understand the history of Salt in China and how that has always been controlled. Basically, some reforms , but don't confuse "competition" with new competitors. And while we may have a few darlings who are flavor of the month, they aren't "family". Essentially, the current model is to issue import certificates to as many companies as want them, slowly, with a nice little clip along the way. You sit back and observe while_they_establish the recognition, education and product awareness. You let them spend_their_money laying down track. When you have identified the hot spots and the distribution channels are all in place, you revoke their certificate (or create an artificial scandal to precipitate that) and...guess who comes in to sell their product through those channels? The only thing worse than a company that doesn't know it is being played and thinks its river of gold will run forever, is one that doesn't even care to know their own sales numbers. That professional investors are still projecting sales growth without understanding what is happening is pure arrogance- for goodness sake the Chinese government even told us_what_they were doing and what the dates for the key changes were. Any Chinese person packing goods at the local shops can tell you the game - you sell into existing channels, make your money quick, don't hold inventory and get ready to jump onto the next brand or product when the rug is from today's darling. Good article here http://www.smh.com.au/business/retail/how-life-for-milks-market-darling-turned-sour-in-china-20161208-gt7a3i.html