Key points

• A2 Milk is restructuring its supply chain as part of a broader shift in its growth strategy
• A revamped supply chain intends to help strengthen A2 Milk’s distribution network in China after the company lost one of its key corporate customers this year
• Shares are rallying today amid the announcement made yesterday and broader gains across the ASX

The A2 Milk Company Ltd (ASX: A2M) share price is enjoying another day in the green today. It’s currently up 0.86% to $5.88, taking its gains this week to more than 8%.

The rise comes after the fresh milk and infant formula company announced plans to transform its supply chain in China through the appointment of a new executive.

However, A2 Milk shares are also likely benefitting from gains in the broader market. This follows a strong night on Wall Street, which saw the Nasdaq Composite (NASDAQ: .IXIC) jump more than 7%.

The S&P/ASX 200 Index (ASX: XJO) is currently up 2.45%, while the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) is climbing 1.35%.

Let’s take a look at what A2 Milk announced yesterday.

A2 Milk appoints new chief supply chain officer

A2 Milk has appointed Chopin Zhang — who has extensive experience in the China infant milk formula market — as its new chief supply chain officer.

Zhang’s role will be to lead A2 Milk’s “end-to-end supply chain in all categories and markets”.

He will have the broader strategic view of “[bringing] together the company’s operations and manufacturing teams to transform the company’s supply chain as a key aspect of its refreshed growth strategy”.

The appointment comes after the company lost its key daigou corporate customer this year. ‘Daigou’ refers to people who export luxury goods, including infant formulas, from outside China to customers in China.

A2 Milk’s CEO David Bortolussi charted its path to recovery after this loss, with a key aspect involving “simplifying and delayering [A2 Milk’s] English label infant milk formula distribution network”.

The appointment of Zhang, therefore, looks consistent in this effort.

According to A2 Milk, Zhang has more than 35 years of experience in supply chain management, including “significant experience” in China and New Zealand

His career highlights include working as Yashili’s chief executive officer from 2017 to 2020, where he reportedly transformed the growth and performance of the business in China while also optimising its New Zealand export business.

He previously held the position of operations and supply chain director (Greater China) for Danone.

What did management say?

A2 Milk’s managing director and CEO David Bortolussi commented on the appointment:

We are pleased to appoint Chopin at such an important time as we transform our supply chain to enable further market access, innovation and growth.

This will be achieved through investing in Mataura Valley Milk and acquiring additional manufacturing capability in New Zealand and China with the support of our strategic partners – China National Agriculture Development Group Co (CNADC), China State Farm Agribusiness (CSFA) and China Animal Husbandry Group (CAHG).

Chopin’s expertise in the China infant milk formula industry and experience across New Zealand and China make him the ideal candidate to take on this new strategic role for the company.

A2 Milk share price snapshot

The A2 Milk share price is up around 7% year to date but down around 5% over the past year. Meanwhile, the ASX 200 is down 4% so far in 2022 and 3% over the past 12 months.

The company’s market capitalisation is around $4.32 billion.