The a2 Milk Company (ASX:A2M) has reported a mismatch between surging consumer demand and supply chain capacity for its infant milk formula business in China.
According to a trading update released for the third quarter of 2026, the company continues to see strong sales growth for its a2 至初 and a2 Platinum brands, partially driven by successful marketing campaigns and competitor product recalls.
However, a2MC warned that "material" product shortages are expected at the retail level during April and May due to a combination of logistical and regulatory hurdles.
The company identified five primary factors disrupting its distribution network.
Heightened geopolitical tensions in the Middle East have impacted air freight availability and costs, while production backlogs persist following manufacturing challenges and asset sales at partner Synlait.
Additionally, more rigorous ingredient testing for cereulide and increased customs inspection rates in China have extended the time required for quality assurance and clearance.
Although manufacturing output has recently returned to target levels, the company is still struggling to clear a backlog of unfilled orders.
While a2MC is currently working with partners in New Zealand and China to expedite shipments, these temporary inventory shortfalls are expected to impact the company's performance through the remainder of the 2026 financial year.