Why the Bellamy's share price crashed 7% lower today

The Bellamy's Australia Ltd (ASX:BAL) share price has had a very disappointing start to the week and is down 7% in afternoon trade. Here's what you need to know…

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The Bellamy's Australia Ltd (ASX: BAL) share price has had a very disappointing start to the week.

In afternoon trade the infant formula company's shares are down 7.5% to $9.65.

Why is the Bellamy's share price being hammered today?

There are a couple of potential catalysts for Bellamy's share price weakness today.

The first is news that President Trump is frustrated with the slow progress of trade talks between China and the United States and has threatened to increase its tariffs on Chinese goods to US$525 billion.

A number of ASX-listed companies that export to China have fallen heavily today, potentially out of fear that they could be impacted if a trade war ensues.

For example, the A2 Milk Company Ltd (ASX: A2M) share price is down 2.5%, the Blackmores Limited (ASX: BKL) share price has fallen 2.5%, the BWX Ltd (ASX: BWX) share price has dropped 2%, the Tassal Group Limited (ASX: TGR) share price has fallen 5.5%, and the Treasury Wine Estates Ltd (ASX: TWE) share price has tumbled 5% lower.

What else has happened?

In addition to this news, this morning goat milk infant formula company Bubs Australia Ltd (ASX: BUB) announced its expansion into organic cow's milk infant formula.

This has positioned Bubs to be the first to offer an Australian made certified organic grass-fed infant formula with both prebiotics and probiotics, in addition to Omega-3 DHA and Omega-6 ARA.

This makes its offering very similar to Bellamy's, meaning the competitive edge of its new formula could be short-lived. Investors may be concerned that Bubs could steal market share away from the company, limiting its future growth.

Whilst this certainly could be the case, it is worth remembering that the Bellamy's brand is strong in China and the company has built up years of trust with consumers in the massive market.

Bubs, on the other hand, is relatively new on the scene and may need quite a bit of time to build its brand up to anywhere near the level that Bellamy's and a2 Milk Company have attained. This could make it worth considering a small investment in Bellamy's after this sizeable pull back.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited, Bubs, BWX Limited, and Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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