The once-highly lucrative daigou market of Chinese shoppers buying and exporting infant formula is in the rearview mirror for A2 Milk, as the company continues to navigate around COVID-19 disruption and China’s declining birth rate.

A2 Milk on Monday revealed double-digit increases in net profits, earnings and revenue for the 2023 financial year. However, it also pointed out ongoing shifts in consumer habits in its core market in China, as parents move away from English-label baby formula (down 6.1 per cent) in favour of Chinese-label products (up 26.9 per cent).

Chief executive David Bortolussi said even though cross-border trading, freight availability and costs had improved, and more Chinese international students were returning to Australia, he anticipated the daigou channel to recover to just “half of what it was” in its pre-pandemic heyday.

“There [are] a lot of things that are conducive to a daigou recovery. Unfortunately, we’re not seeing a significant rebound in that,” Bortolussi said.

Amid a relatively tight labour market, Bortolussi said Chinese international students had plenty of options other than daigou shopping to supplement their income while studying in Australia. Meanwhile, Chinese parents were also increasingly opting to buy their infant formula online and in-store.

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“I can be reasonably definitive about that: [the daigou channel] will not get back to the same size that it was,” Bortolussi said. “We’re hopeful that there may be a recovery but by no means are we dependent on that or planning for that to happen. That would just be a nice thing to occur for everybody.”

The $3.9 billion company has changed its daigou strategy a number of times: in late 2021, A2 Milk signalled it would reduce its reliance on daigou shoppers, but less than a year later planned to rebuild its daigou community, as the channel was “turning a corner”. Bortolussi’s comments on Monday indicate the shift away from daigou shopping looks more permanent.

He also warned of challenges ahead in the Asian country, where fewer babies are being born, competition is expected to tighten, and prices are expected to come under further pressure. A2 Milk’s strategy has been to ramp up advertising and marketing campaigns to raise brand awareness against a backdrop where China’s overall infant formula market size has shrunk 14 per cent.