Why A2M (A2 Milk Company) Share Price Drop

26 March 2024: A2 Milk's share price decline has been happening for a while, and there are several contributing factors:

1. China Market Slowdown: A2M heavily relies on the Chinese market, particularly for infant formula. However, China's birth rate is falling, and the overall infant formula market has shrunk significantly. This directly impacts A2M's sales.
2. Disrupted Relationship with Manufacturer: A2M ended its exclusive manufacturing agreement with Synlait in September 2023 due to performance issues. This created uncertainty and could potentially impact future production.
3. Lower Profitability: A2M's revenue did show a slight increase in August 2023, but profit margins have shrunk. Investors might be concerned about the company's ability to maintain profitability in a challenging market.
4. High Marketing Costs: Some investors were concerned about A2M's high marketing budget and the perceived low return on investment.
5. Even though A2M recently reported positive results with a revenue increase, the market might be focusing more on the long-term challenges  like the declining Chinese market.