The Bellamy's Australia Ltd (ASX: BAL) share price has skyrocketed in 2015, making it one of the best performing companies on the Australian share market. The shares have risen an astonishing 641% since the beginning of the year and 52% over the last month.
Here are five reasons why the Bellamy's share price is rising so strongly:
- Australian-made & 100% Certified Organic
Organic food is one of the fastest growing sectors of the global food industry and that is especially the case when it comes to children. Parents inherently want what is best for their children, ranging from items such as prams and toys to absolute necessities like clothing and food. While this in itself puts Bellamy's in a great position to benefit, what makes it even more special is its 100% certified organic products which guarantees quality is upheld.
- Chinese demand
To expand on the first point above, demand has been particularly strong for quality organic baby formula from China and other Asian countries. There have been a number of health scares from Chinese-based food producers where quality standards are not as high as they are in Australia, which has even resulted in the deaths of infants in some circumstances. As such, parents would prefer to source their food from reliable producers, many of which reside in Australia and New Zealand (notably, Bellamy's is based in Tasmania).
- One-Child Policy
China recently scrapped its controversial one-child policy, allowing parents throughout the nation to now have two children. This could spark something of a mini baby-boom, providing plenty of growth for companies like Bellamy's.
- Straight off the shelf
There is a tremendous shortage of supply right now. Woolworths Limited (ASX: WOW) and Coles, owned by Wesfarmers Ltd (ASX: WES), have both been forced to restrict customers to a certain quantity of infant formula tins per transaction as supplies were leaving the shelves too quickly, not allowing parents the opportunity to buy their share.
Indeed, once parents find a product that their child takes to, they want to stick with it so lack of availability is a big issue. It's also attracted plenty of interest from the media with some parents reported to have travelled more than 20km just to find available stock. Other brands like Karicare and A2 MILK FPO NZ (ASX: A2M) ("A2 Milk") are also in huge demand.
- Excess demand
Excess demand is a great problem for any business to have, but it's an issue nonetheless. To curb the issue, Bellamy's signed a manufacturing agreement with Tatura Milk Industries – a wholly owned subsidiary of Bega Cheese Ltd (ASX: BGA), in July this year while it signed another agreement with FONTERRA ORD UNIT (ASX: FSF) earlier this week. Manufacturing will commence mid-2016 while the contract is for five years.
