A relaxation of China’s one-child policy may eventually give rise to millions of additional babies, increasing from the estimated 16 million born in China every year. This means a new wave of demand, starting with an instant increase in demand for infant-related nutritional products, and food supply demand increasing in the years to follow.
While the change to the one-child policy will have little impact on the majority of Australia’s listed companies, a few will be directly impacted. With the Australian economy currently in a precarious position, the Chinese policy change provides a select opportunity for domestic investors and companies alike.
Chinese demand will undoubtedly continue to be a key determinant of Australia’s export performance. Beyond commodities, food companies are in prime position to continue satisfying the appetites of hungry Chinese.
The fiercely contested cheese wars highlight just how much companies want to get their hands on Warrnambool Cheese and Butter. For good reason too – China already has a hunger for Australian made and packaged cheese and whey protein products, and that will only grow with faster population growth.
It is all but a foregone conclusion that Warrnambool will be snapped up by one of its suitors. If Bega is successful in acquiring Warrnambool, it will have even more capacity to supply infant nutritional dairy products to China.
For Bega, export sales are helping build on sales revenue year after year. Irrespective of the outcome of the Warnambool takeover saga, Bega is in a solid position to continue building on its exports to China and the Asian region and to the Middle East.
Tassal Group Ltd
Recent reports have the Scottish salmon farming industry failing to keep pace with the increase in production required to meet China’s burgeoning desire for salmon delights. While Tassal has previously been actively involved in the export market, last financial year it cut back exporting endeavours due to the volatility of the export market.
Demand for salmon products in China confirms demand exists for Tassal’s products beyond Australia. If the opportunity presents for Tassal to export directly to China, it would make a good story for investors.
The top of Tassal’s register is dominated by holding companies, but firmly at the top is Pacific Andes Resources Development, a Chinese importer of fish. Evidently a company that sees an opportunity in what Tassal has to offer.
While the investment story could take time to unfold, China’s demand for infant nutritional products and salmon places Bega and Tassal in a favourable position.