A2 Corporation (A2C) has appointed China State Farm Holding Shanghai Company (CSF) as the exclusive distributor of brand infant formula in the Peoples Republic of China.
CSF is a wholly owned subsidiary of China National Agriculture Development Group.
The distribution agreement is for three consecutive three-year terms with renewal conditional on the achievement of agreed performance hurdles including distribution coverage.
CSF plans to establish a support infrastructure, appoint sub-distributors and initially establish distribution in five core tier 1 cities and progressively expand across China, Hong Kong and Macau.
A2C managing director Geoffrey Babidge said: "Having now secured both supply and distribution for a2™ brand infant formula with highly credible and experienced market participants, A2C is now well positioned to enter the Chinese market which will support the Company's strong future earnings growth profile."
A2C will derive its revenue from the sale of a2 brand infant formula to CSF. The infant formula will be sourced in New Zealand.
The business plan currently assumes annual sales revenues growing progressively to approximately $50m in year four.
It is expected that production of a2 brand infant formula will commence from December 2012, with the first sales to China to take place by June 2013.
A2C expects to commit funding of $5m during 2013/14 for administration, initial marketing contribution and working capital to support the establishment of the business.
