Good morning, ladies and gentlemen, or good afternoon, or good evening, wherever you may be in the world. My name is David Hearn, and as Chair of your board, I have the privilege of chairing this annual meeting. Who would have thought last year when we had our first-ever virtual meeting that it would not be our one and only? Sadly, due to the tenacity of the COVID-19 pandemic, we're forced to have a virtual meeting yet again this year. I'm sure we all hope that next year our lives will be freer again, and as a result, we'll be able to schedule this meeting in person. As always, today you can vote and I ask questions online. I would encourage you, though, to send through your questions as soon as you can, so that we can make the process as efficient as possible.
To give you a guideline of timing, we will allow approximately 45 minutes to an hour for questions at the end of the formal part of this meeting, which I hope will be more than enough to cover all the important points. On behalf of the board of The a2 Milk Company Limited, I would like to welcome you formally to The a2 Milk Company's annual meeting. In accordance with the constitution of the company, I am satisfied that a quorum is present, and I declare the meeting open. Firstly, let me introduce the company's directors who are joining us today virtually. We have first Julia Hoare, the company's Deputy Chair, joining us from New Zealand. We have Warwick Every-Burns joining us from Sydney. We have Pip Greenwood joining us from New Zealand. We have Bessie Lee joining us from China.
We have David Bortolussi, our Managing Director and CEO, joining us from Melbourne. Let me also introduce the company's Chief Financial Officer, Race Strauss, and the company's Chief Legal and Sustainability Officer and the company secretary, Jaron McVicar. Also joining us today are representatives from the company's legal advisors and our auditor, Ernst & Young. We have received no apologies in advance of this meeting. The agenda for this meeting is shown on the slide here. I will make a short introductory speech first, after which I shall ask David Bortolussi, our CEO, to address the meeting. We will then proceed to the formal business of the meeting and any general business as outlined in the notice of the meeting, which has been circulated to all shareholders in advance. Unless there are any objections, I will proceed on the basis that the notice of meeting is taken as read.
The notice of meeting and the annual report are available on our website. I have been advised that 1,401 valid proxies have been received, representing more than 348 million shares, or roughly 47% of the total number of votes able to be cast at the meeting. The minutes of the last annual meeting, held on the eighteenth of November 2020, have been signed by me as Chair of that meeting as a correct record of those proceedings. Given that the last 18 months has been tumultuous for our company and our shareholders, I would now like to make some remarks to put these events into perspective. As I noted in my letter to shareholders a few months ago, there is no hiding from the fact that 2021 fiscal year was a very challenging year for the company.
I don't need to explain to you that we as a company, along with all of us individually, have experienced an extended period of great uncertainty and volatility caused by several different factors, including, of course, the COVID-19 pandemic. If it was a challenging year for the company and its management, I recognize that it was a very disappointing year for you, our shareholders, in many ways. While we were disappointed with our financial performance and the pressure this has put on our share price, we were, however, pleased to deliver many significant achievements against our other strategic objectives, despite the challenging market conditions. Today, I would like to take the opportunity to cover a number of topics that we believe are of importance to you.
Firstly, I would like to step you through some of the challenges we faced during the course of the 2021 fiscal year and the actions that the company has taken to address these issues. Secondly, I would like to provide the board's perspective of the company's revised growth strategy that has been undertaken in recent months. David Bortolussi will provide more detail on this in his address as well, but it is important that shareholders also understand this from the board's perspective. Thirdly, and related to this, I will discuss how the board is thinking about capital allocation and capital management. I will then cover the board renewal and management changes that have occurred during this year. Finally, I will address some additional topics that we know are on shareholders' minds. First, stepping through the fiscal year 2021, the challenges and actions taken.
As we all know, in fiscal 2021, the company experienced great uncertainty and equally great volatility. During this period of volatility, the normal behaviors of both our consumers and our trade customers changed, in some cases radically, as a result primarily of their reaction to the COVID crisis. This had a profound and very challenging effect on many aspects of our business. Across the early phase of the pandemic, and particularly in our infant nutrition business, there were highly unusual swings in demand as consumers tended to panic buy and pantry load, creating a large spike in sales, which was followed several months later by a gradual unwinding of these pantry stocks as things settled down.
These dramatic swings in consumer behavior subsequently drove equally significant changes in the behavior of many of our trade customers as they tried to meet these volatile demand patterns themselves, while trying to balance off their own challenges at the same time. The other point to make is that these swings in consumer demand were exacerbated by real concerns over the future availability of certain key infant nutrition ingredients, which are sourced from all over the world. In order to make sure that we were able to meet any further spikes in demand in the early period of the COVID-19 pandemic, we chose to build our own inventory levels to ensure that we were able to meet potential demand patterns without facing any supply chain disruption.
While this was a rational decision to make at the time, given the prevailing uncertainty, especially bearing in mind that we commit to production three months in advance, the anticipated demand for these increased orders didn't materialize, and as a result, this led to increases in our own inventory. As a result of these challenges, excess inventories built up right across our business, both internally and externally, throughout our distribution channels. This excess inventory buildup was also exacerbated by a March general slowdown in the overall infant formula market within China for the first time in over 15 years. To address the excess inventory levels, the board and management put in aggressive measures in the fourth quarter of the fiscal year to address the situation. These challenges impacted our English-label infant nutrition business in particular.
In the first quarter of the fiscal year, we were impacted by the flow-on effect of pantry destocking following a strong sales uplift in the third quarter of the previous year. Furthermore, there were lower than anticipated sales to retail Daigous in Australia due to multiple reasons, including reduced tourism from China and reduced international student numbers. By the end of the first quarter, our major reseller customers started to feel increased disruption within their businesses, impacting our trading with them. With the effect of the disruption in the reseller channel, we shifted our focus to activating the CBEC channel in a manner which complemented our reseller business. By the end of the second quarter, it became clear that the disruption we were experiencing in the reseller channel was also impacting our CBEC business.
Following a board-initiated comprehensive inventory review undertaken by management in the second half, it became clear that the challenges in the reseller and CBEC channels were being exacerbated by the overall high level of channel inventory as a result of the highly complex and multilayered distribution and channel systems in which we operate in China. In the third quarter of the fiscal year, we announced a number of initiatives, particularly in those heavily affected channels, to address these issues. Specifically, we deliberately slowed down our sales into the CBEC channel to reduce inventory levels. We reduced our forward orders from our infant nutrition supplier, Synlait, to reduce our own internal stock levels, and we embarked on a series of promotional programs designed to move product through these channels more quickly.
While these channels had some positive effect, the board and management took the decision that we ultimately needed to take more aggressive action to address these issues fully and allow the business to return to growth as quickly as possible. As we disclosed in our update on May 10, the board made the difficult decision to address the inventory issues head on once and for all and aggressively deal with the situation in a substantive way. This decision required significant inventory write-downs and external distributor inventory swaps, which was costly but effective in helping to restore balance and appropriate pricing in the marketplace. Ultimately, we believe that these decisions were in the best interests of the company's medium and long-term interests, and we created a platform for a return to growth in the future.
I, along with the board and the executive management team, am confident that the approach we've taken, while very painful in the short term, will place the company in a much better position to begin to return to a growth trajectory, primarily by continuing to build our strong brand from the solid base that we've created over the past several years. Pleasingly, as David and the management team updated the market a few weeks ago, we are starting to see positive signs from the action we took earlier in the year. This background leads us on to our growth strategy review. The overall market environment we are trading in has changed more significantly and more quickly in the past year than anyone could have predicted, and in 30 years in business, more quickly than I have ever seen in any market anywhere in the world.
Not only did we have significant disruption to the cross-border channels, but for the first time the market started to decline as a result of a decrease in the number of births in China. We're also starting to see that translate into retail price pressure as competitors and retailers turn to discounting to try and maintain their sales. A further point to make is that consumers are no longer actively prioritizing international brands alone. There's been a mixed shift from international to domestic brands. However, in our view, this is not necessarily about consumers preferring domestic brands per se, but rather, being an international brand is no longer a critical success factor on its own. More so than ever, it is the underlying strength of a brand and its ability to connect and engage with local consumers, not just its geographic provenance, that will ultimately dictate success or otherwise.
Now, this trend puts a2 in a fundamentally good place for the long term. We have established a real point of difference with our brand, which we know resonates strongly with local consumers. We've never relied solely on our New Zealand heritage, although, of course, it remains an important component of our story. We can see this in the underlying resilience in our market shares and our consumer health data, all of which shows that we are still seen as an attractive brand with a real reason for being in an overly crowded market with far too many me too brands fighting over a diminishing cake. However, despite these strengths, these changes do mean that we need to adapt our approach to driving growth in this changed market in the future. Over the past several months, the management team has undertaken an extensive review of our growth strategy.
We will need to continue to develop new and appropriate strategies to succeed in the future, not by discarding the foundations on which we've built past success, but by building upon them and developing them further to remain fit for purpose in this new world. It is for this reason, and because our confidence in the underlying strength of the a2 brand, that we will be continuing to invest behind the brand through this period of rebalancing and into the future. David and the management team shared a lot of detail on our strategy at our recent Investor Day a few weeks ago.
It is important for shareholders to be aware that the board also has been fully involved in the growth strategy review, and we fully endorse the strategy as presented and are confident in the plans that David and his team are developing off the back of this work. The overall market environment has changed more significantly and more quickly than we could have predicted, as I said, but we understand the present challenges. We have adapted our growth strategy, and we are confident in the plan going forward. The next topic I'd like to spend some time on is capital allocation and capital management. In many ways, this is interrelated to what I've just spoken about in terms of our strategy. However, it is important to make a few specific points.
Firstly, we continue to be in a very strong position from a financial perspective with a significant cash balance. There are numerous potential opportunities, both in the growth of the business and to secure market access into China and or to invest in our supply chain. This year, we already used some of that balance sheet strength to acquire a 75% interest in Mataura Valley Milk, which we firmly believe is an example of our continuing capital smart strategy. In MVM, we've secured control of a potentially world-class manufacturing site with the opportunity to own our own licenses in the future for a price significantly below the replacement cost to build it and without the 4-5-year timeframe that it would take to do so.
While there is still work to be done further to integrate this world-class manufacturing asset into our business, we are excited about the opportunities it opens up for us. Very importantly, we're also very excited about the partnering with China Animal Husbandry Group. This partnership deepens our relationship with and highlights our strong commitment to China. As you all know, strategic partners, partnerships have been an essential ingredient to our success as they are to any international business in China. This relationship complements our already excellent relationship with China State Farm. China Animal Husbandry Group and China State Farm are both part of the larger CNADC company, a state-owned enterprise in China.
Our strategic partnerships also include our strong relationship with Synlait and Bright, and we believe that this acquisition, therefore, puts us in an even stronger position with a number of different local partners, all of which add value to our business and will strengthen our ability to operate successfully in China in the future. While our capital allocation framework prioritizes investment in growth initiatives ahead of returning capital to shareholders, that is not to say that the board doesn't regularly review various capital management options in detail. During the past year, the board has actively reviewed capital management initiatives and will continue to do so in the future.
The good news is that despite the challenges that the business has had to deal with, the company remains in a strong capital position, which gives us both security in these uncertain times, and more importantly, the ability to be able to capture opportunities for additional growth as and when they arise. The board believes that the continued uncertainty and volatility in the markets in which we operate actually creates new opportunities for growth, which we are continuing to evaluate.
As a result, the board has decided that at least in the immediate term, these opportunities potentially offer more value to shareholders than a simple return of capital, and that therefore now would not be the right time to return capital or introduce the dividend. That said, as I've commented already, the board will continue to keep the situation under review since we are always mindful that our strong balance sheet ultimately belongs to our shareholders. The next topic I'd like to cover is the board renewal and management changes that have occurred during the year. During the year, we were sad to announce the retirement of Jesse Wu as a director. At the same time, we were delighted to announce the appointment of Bessie Lee as an independent non-executive director of the company.
Bessie is up for election today, so you will hear from her later, and I will make some specific comments in respect of her election later. Let me say up front that even in the short time that Bessie has been with us, she has made a valuable contribution to the board. I and the board are cognizant of the benefits of having a range of experiences on the board and supplementing or renewing the board over time as the business continues to develop. Over the coming years, we will be undertaking an orderly board renewal process to refresh the board in line with the growth plans for the business. This will focus on finding new directors with experience aligned with our growth ambitions, especially within the China market and in the manufacturing and supply chain areas, given our recent investment in these important businesses.
While it's premature for us to outline the precise plan at this point, we will update shareholders as appropriate. As you also know, there have been a number of changes to the executive leadership team in the past year. Most importantly, the appointment of our new CEO, David Bortolussi, from whom you will hear later in the meeting. On behalf of the board, I would like to thank Geoff Babbage for returning to the company in 2019 and for his leadership during a tumultuous year. In the second half of the fiscal year, we also bid farewell to Lisa Burquest, Susan Massasso, and Peter Nathan, all of whom had contributed significantly to the growth and success of the business in the past. We wish each of them every success in the future.
Given the changes that our business has had to make in response to all the challenges, particularly those in the past year, it was a particularly opportune time to usher in a new management team. We were pleased in February 2021 to welcome David Bortolussi. David's leadership and contribution has been immense already. Alongside a complete review of all aspects of the business, one of the many tasks that David has undertaken has been to bolster the executive team further. Consequently, there have been a number of changes, promotions, and new appointments, which the board is confident will set the business up strongly for the future. Finally, there are a few additional items that I would like to address, as I expect there are questions which are already on shareholders' minds.
The first issue is that some shareholders have raised with us a view that we should have kept the market better informed during 2021. As I mentioned earlier, fiscal year 2021 was no ordinary year. We faced unprecedented changes in our markets, things that were rapidly evolving. In the face of this volatility, uncertainty, we made numerous announcements to the market over the period to keep you informed about the shifting market conditions, consumer behaviors, new initiatives, and the financial outlook. All these updates were based on the best information we had at the time. It is disappointing to make multiple updates to our outlook in a single year, but we exercised our judgment in determining reasonable and appropriate guidance and did so in difficult and unprecedented circumstances. The second issue is that the announcement we have made in relation to a potential class action.
On the sixth of October, the company announced that it had been notified that group proceedings had been filed in the Supreme Court of Victoria, which named the company as the defendant. These proceedings, filed by Slater and Gordon lawyers, are said to be brought on behalf of shareholders who acquired an interest in fully paid ordinary shares in the company. In addition. In an additional statement on the twenty-first of October, the company announced that it was aware of media reports concerning a potential class action against the company that is apparently being investigated by Shine Lawyers. The company is not aware of any legal proceeding having been filed by Shine Lawyers at this time.
However, it is important for shareholders to know that the company considers that it has at all times complied with its disclosure obligations, and we deny any liability or wrongdoing, and the company will vigorously defend these proceedings. For obvious reasons, we're not able to make further comment in relation to this matter today. The other topic I would like to address is the decision made by the board to award the executive leadership team a short-term incentive payment for the fiscal 2021 year. This has been raised by shareholders and other market participants, so I'll address it up front rather than waiting for the question and answer session.
The board considered carefully the correct and balanced judgment when considering the 2021 short-term incentive payments to ensure that the correct balance was struck between the disappointing overall financial results of the company across the period and the motivation and retention of key staff who delivered significant achievements against our strategic objectives and have worked harder than ever in addressing the challenges of the business. Striking the right balance between these two perspectives is clearly important and critically is in the long-term interest of all shareholders. The board felt it was important to recognize the contribution against our strategic objectives made by a highly capable and executive team who worked tirelessly in an extremely challenging external environment, and the need to ensure that they remain fully engaged and retained, which is clearly in the best long-term interest of the shareholders.
As a result of these deliberations, the decision was taken to pay out 30% against a maximum outcome for the group performance scorecard of 120%. That 30% out of 120% was comprised of 0% for the non-achievement of the financial measures, which is hardly surprising. The 30% reflects the partial achievement of the non-financial measures which were put in place at the start of the year. No performance personal multiplier was applied to any individual for 2021. Now, I understand that some may feel that this decision was not correct, but it is important to note that firstly, the board took great care to work through the issues in a balanced and what we considered was a fair way.
Secondly, it should be recognized that the management team's LTI payments for the last two years will not be triggered in addition to the cutback in STI payments, which of course, is wholly appropriate given the event of the past 18 months. We felt that given the interest in these topics, we should address these things up front. Some final thoughts I would like to leave you with before David presents. While the issues that arose in 2021 fiscal year were undoubtedly a challenge, the business remains at its heart, a very robust, differentiated, branded business with exceptionally strong financials. In my opinion, this is the reason that we've been able to weather this period of volatility at all. It would not be hard to see that challenges such as these could have broken a weakened company completely and the business.
The a2 brand remains strong, and it should be noted that it is the only major brand of scale that had actually gained share in China-label in the last financial year. I also recognize the serious pain felt by the performance of the business in the last year for you, our shareholders. I regret that despite an extended period of stellar performance, we were not able to weather this storm better in 2021. However, the board and I, along with the management team, do remain confident in the fundamental strengths of the business, confident in our brand, confident in the new management team, and confident in the plans to take us forward. Thank you for your attention, and I will now invite David Bortolussi to present his address to you. Over to you, David.
Thanks, David. Good morning, everyone, and thank you for joining us today. It's my great honor and privilege to be addressing you in my first annual meeting as your Managing Director and Chief Executive Officer. Today, I will start by providing an overview of last year's result and the key actions we've taken recently to rebalance our inventory levels, invest in our brand, bolster our leadership team, and refresh our growth strategy. As you know, the a2 story is extraordinary, and a key feature of that story is its different chapters of growth over the years. When I was joining the company, I was interested to learn that a2's original commercial ambitions were to license its intellectual property. When that wasn't successful, the company adapted, and in 2007 moved from an IP focus to launching the a2 Milk brand in Australia.
The years that followed, including the development of our infant milk formula or IMF business, were truly remarkable. However, after years of impressive growth, the business was disrupted in FY 2021, which has led us to reflect on and adapt our strategy for growth again. This slide provides a brief overview of our FY 2021 results. Clearly, it was a disappointing financial result, with revenue for the group down 30% and EBITDA and net profit down 78% and 79% respectively. Sales of China-label IMF increased 15% and our Australian milk business was up 11%. However, this was more than offset by the challenges experienced in our English-label IMF with sales down 52%. I'll take some time now to reflect on the issues that disrupted our business and the key actions we've taken in response.
COVID-19 and the border closures that followed disrupted cross-border sales for us and other companies exporting through this channel. These disruptions caused significant volatility in our demand and supply, which ultimately led to material excess inventory which exacerbated the issue. All of this played a role in the significant decline in our English-label IMF sales. At the same time, and not immediately apparent to us until May this year, the China IMF market started to decline, driven by an almost 20% reduction in the number of births. However, as we discussed in May and updated you at our results in August, we took significant actions to address this disruption. We took action to address excess inventory and constrained sales to support English-label IMF market pricing which is a key driver of channel economics.
We swapped older inventory at distributors with newer inventory where possible to improve product freshness, which is a key concern for consumers. We increased brand investment to drive consumer demand. We bolstered our leadership team and reorganized for enhanced focus, and we refreshed our strategy to adapt for growth in a new context. This slide summarizes the steps we took in the second half of FY 2021 to address the inventory buildup, particularly in English-label IMF. In total, 7.6 million units of English-label product were written down, of which 1 million units were swapped with distributors for fresher product. As a result of these actions, our English-label product freshness across our distributors in CBEC and in our reseller network has improved significantly with virtually all product now with greater than 18 months remaining shelf life.
These actions and other initiatives have supported improved pricing across English-label channels, which is encouraging. We also took similar actions to a lesser extent to rebalance China-label inventory levels and to constrain sales in the fourth quarter of FY 2021 and the first quarter of this year. Another key action taken in the fourth quarter of FY 2021 was to deliberately increase brand investment to drive consumer demand. This was also done in recognition of the reduced brand activity being undertaken by English-label resellers and to compensate for the absence of a significant campaign in the first half. Our brand health metrics are strong and have improved recently on the back of this increased investment. The top chart on the right-hand side shows improvements in brand awareness and trial across the funnel.
The chart below shows our opportunity to increase awareness to leverage our relatively high levels of conversion to trial and loyalty, and we plan to increase our brand investment further as part of our strategy. Our leadership team comprises both our business unit leaders as well as our functional leaders working together as one team to lead A2 globally. This year, we have bolstered the team and reorganized our Asia Pacific division. There have been four internal role expansions and promotions reflecting strength in internal talent, and we have brought four additional leaders into the business, including our new Chief Marketing Officer, Edith Bailey from Danone, who will be commencing with us in a few weeks' time.
Over the past six months, we have reviewed our China market opportunity, our brand positioning, our route to market challenges and opportunities, our product portfolio, as well as the potential to expand into adjacent categories and new markets. The work has been comprehensive and forms the basis of our growth strategy going forward. We've endeavored to summarize a lot of our work into this group strategy on a page which sets out our ambition, goals, strategic priorities, enablers, and values. Our purpose remains to enrich lives by harnessing the nutritional wonders of nature. Our ambition, as articulated here, is new. We are committed to rebuilding a2 into the growth company we've been throughout our history, returning to our pioneering and innovative roots and elevating our focus on sustainability. Our ambition is reflected in our high-level goals covering people, sustainability, consumers, and shareholders.
I'm committed to creating long-term value for our shareholders and building a trusted and transparent relationship. To deliver on our ambition and goals, we have five strategic priorities. Firstly, we will be investing in people and planet leadership. Without a strong team, we can't deliver on our priorities, and without being conscious of the impact we're having on the planet, we can't ensure the sustainability of our business in the long term. We're setting ourselves a bold ambition here, which is one of our most important priorities. Secondly, our most critical business objective is to achieve our full potential in China IMF. While we have a portfolio of initiatives to deliver on this priority, two key themes to note here are, firstly, we will streamline our distribution model over time to get closer to our consumer.
Secondly, we will invest in our brand to generate ongoing consumer pull for our product in a way that reflects evolving consumer needs and channel preferences. Third, it's important that we significantly ramp up our product innovation. We need to expand our IMF portfolios, both for China-label and English-label. In all markets, we need to enter adjacent product categories to drive growth. Given the success of the a2 business until recently, new product development hasn't been a priority, but it will be going forward. Next, we need to transform our supply chain. This includes expanding our China-label market access, utilizing the capacity we now have at MVM, and over time, developing supply chain capabilities in China to support our growth ambitions.
Finally, achieving profitability across all our business units, we are determined to find a pathway to profitability in the U.S. as quickly as possible and to increase MVM utilization through insourcing a2 volumes and developing third-party business. This slide illustrates our ambition and measures of success for our China-label and English-label IMF businesses. Most importantly, our aim is to be a top five China-label brand and to have the number one English-label product range. Our medium-term ambition is to increase sales in China-label by approximately $400 million by doubling our share from around 2.5% to over 5% and to grow our English-label by approximately $300 million through channel recovery and gaining share in the reseller and CBEC channels. To achieve this, we have refined our priorities to adapt to the change in market context.
Our number one priority is to continue to invest in and nurture our brand, to remain relevant to the next generation of mothers, both functionally and emotionally, and to drive demand. We will also drive distribution growth in-store and online, focusing on early-stage recruitment and late-stage retention. Lastly, in relation to China, some shareholders have asked why we still sell through the Daigou channel. The reality is that the Daigou channel has evolved significantly over time from a suitcase trade to corporate Daigou to a sophisticated multi-channel re-reseller business. This reseller channel is largely an e-commerce business through a range of consumer-to-consumer and offline-to-online platforms. The closed consumer to consumer network, such as that conducted via WeChat, is only about 30% of the reseller channel and 10% of our overall China IMF business.
Having said that, the Daigou channel is an important new user recruitment and brand-building channel, which we will continue to support going forward. On the next page, I want to reiterate and publicly acknowledge the incredible support we receive from our strategic partners in relation to our China business. Starting with the long-term relationships we've had with China State Farm and Synlait, and more recently with the MVM acquisition, China Animal Husbandry Group. Both China State Farm and China Animal Husbandry Group are part of the larger China National Agricultural Development Group, which is an important state-owned enterprise. These relationships are very important to enabling the effective execution of our strategy in China, and we are very committed to investing in and developing our China business as our highest priority. We are also looking outside our core for new growth opportunities.
We are expanding our portfolio in China to target the whole family, and we have identified several new markets to prioritize for growth. Our medium-term ambition is to generate approximately NZD 200 million in sales from expanding our portfolio in China and around NZD 100 million of sales from existing and new markets over time. In ANZ, our ambition is to generate approximately NZD 100 million in additional sales over time while maintaining our number one position in fresh milk and seeking to expand into new categories. In the U.S., while we have goals to grow the business over time, our focus is on achieving profitability as quickly as possible. Our non-financial measures of success focus on people, sustainability, brand health, market share, and innovation.
I won't go through each of these measures in detail today, but I did want to highlight how seriously we are taking sustainability by upgrading our commitments to achieve Scope 1 and 2 net zero by 2030 and Scope 3 by 2040. Our recently announced MVM electrification project is indicative of our commitment in this area. In terms of our financial goals, our ambition is to grow sales to over NZD 2 billion in the next five or more years and to improve margins. Most of our sales ambition is expected to be driven by growth in our China business through China-label IMF, English-label IMF, macro milk, and other nutritional products.
While we would of course like to have greater diversification in our markets over time, the reality is that the size of the opportunity that we have in China is substantially greater than other options, so we must focus our resources on capturing this opportunity. In terms of EBITDA margins, it is worth noting that IMF sales, and particularly English-label, will be the key driver of our margin outcomes. Over the next few years, we are anticipating EBITDA margins in the teens due to a range of factors, including market conditions, mix of business, investment levels, and innovation. While it is possible that EBITDA margins may improve further into the low to mid-twenties in the medium to long term, this would, among other things, require much higher than expected recovery in our English-label IMF business.
In terms of achieving our ambition, there are a wide range of outcomes possible with significant upside and downside risk. In addition to execution risks, there are a number of macro factors that could materially impact our results in the future, including how the China birth rate will evolve and the impact policy changes may have on this, the extent and pace of recovery in cross-border trade post COVID-19, how the competitive landscape will evolve in China, including the outcome of the new GB registration process, the extent and pace of change in consumer product and channel preferences, and how the China regulatory framework and international re-relations may evolve and impact trade. Notwithstanding these uncertainties, I hope that we have clearly communicated our ambition and strategy to you and how we are going to achieve it over time.
If you'd like further information on this, I'd refer you to our Investor Day presentation on 27 October, which is available on our website. In relation to this year, we provided a brief update on our trading at our Investor Day a few weeks ago with no material change to the FY 2022 position as outlined in our FY 2021 August results announcement, except that we are seeing a different mix in our business favoring English-label IMF. The only additional update today is in relation to our trading over the 11/11 online sales period in China, which completed at the end of last week. Last year, our English-label IMF product was promoted heavily in the 11/11 event, which caused some disruption between CBEC and reseller pricing and trade. This year, we prioritized overall channel economics through reduced inventory levels and promotional activity in CBEC.
As a result, and as expected, our English-label sales during the 11/11 online sales period were down on last year, but with improved market pricing across CBEC platforms and the reseller channels. Conversely, our China-label sales were up significantly on a smaller base. Overall, we believe our platform rankings were maintained or improved relative to the competition, which is subject to confirmation by the platforms in due course. To summarize the key messages I want you to take away. Firstly, the overall market environment has gone through significant change over the past 12 months. The speed and extent of change has been more than anyone could have anticipated. These changes have required us to adapt our approach. Adapting to the market and capturing opportunities is in our company's DNA, and this will be the next iteration in our company's growth story.
Importantly, our brand and the proposition that underpins it remains strong and relevant. Consumers love the a2 Milk story and what we stand for. In China, which is our key growth market, we have a relatively small share and a significant opportunity to grow despite current headwinds. We've refreshed our strategy. We have a great leadership team in place, and throughout our business, we have a culture built on a pioneering spirit that we're confident will support us to achieve our ambition. Thank you very much for your time, and I now hand back to the chairman.
Thank you, David. We'll obviously have time for questions at the end. We now move to the formal business of the meeting. As Chair, I've determined that e-voting on each resolution will be conducted by way of a poll in accordance with the NZX listing rules. You can vote by clicking the Get a voting card box, and the results will be posted on the NZX and ASX after the meeting. As in the past, therefore, we will not declare the results of the votes at this meeting, but we will announce them on the NZX and ASX platforms when they're available later today. I should inform you that I've been appointed proxy in respect of approximately 343 million shares out of approximately 743 million total shares on issue.
As indicated on the proxy form, I intend to vote all discretionary proxies in favor of each resolution. You can ask questions by clicking on the Ask a question button. If you have not already done so, can I ask that shareholders please submit their questions relating to the resolutions now so that we can go through and answer them as quickly as we go through each resolution? General questions not relating to a specific resolution will be put to the board during the last part of the meeting. To make the process most efficient and, to the extent possible, we will endeavor to group similar questions together. May I also ask that shareholders limit themselves to two questions such that we can respond to as many shareholders as possible during this meeting.
As stated in the notice of meeting, all resolutions are ordinary resolutions. To be passed therefore, the approval of a simple majority of votes of those shareholders entitled to vote and voting is required. Item one. The first item of business is to receive and consider the company's financial statements for the year ended thirtieth June 2021, together with the directors' and auditors' reports. The annual report containing these financial statements and the auditor's report for the twelve months ended 30th June 2021 has been circulated to all shareholders. Are there any questions on the annual report itself or the financial statements?
Chairman, there are no questions on this matter.
Okay. In which case, given there are no further questions, we will move on to the other resolutions, this not requiring a formal vote. Last one. Pursuant to the Companies Act, the company wishes to authorize the directors of the company to fix the fees and expenses of the company's auditor, Ernst & Young, for the ensuing year. Are there any questions relating to this resolution?
Chairman, there are no questions on this matter.
I now therefore propose that the director of the company be authorized to fix the fees and expenses of the company's auditor, Ernst & Young, for the ensuing year, and I put the motion to vote. Please, would you now cast your votes? Thank you. Turning to item three. In accordance with the company's constitution, David Bortolussi, who was appointed Managing Director of the company during the year, is retiring at this meeting. Being eligible, offers himself for election as director of the company. David's experience is set out in the notice of meeting. I would like to say that in my many years of running businesses all over the world, I can honestly say that we are very lucky to have the services of David as our CEO. Excuse me.
Not only is his experience and ability of the highest order, but importantly, his character and steadiness as a leader through these challenging times are absolutely what the company needs at this point. I and the board commend David to you as a director of the company, and we unanimously support his election. I will now therefore ask David to say a few words. David.
Thank you, Chairman. Hello again, everyone. I joined the company in February this year as your Managing Director and Chief Executive Officer, and I'm delighted to be speaking to you today about my appointment to the board and my aspirations to tackle our current challenges to rebuild a2 into an exciting, innovative and sustainable growth company. I joined The a2 Milk Company from my most recent role as Group President, International Innerwear at HanesBrands. I believe that my experience in the consumer and retail space at HanesBrands prior to that, at Pacific Brands and Foster's Group across international markets, including China, Southeast Asia, New Zealand, Australia, and the U.S., is relevant to our business. The market, particularly in China, is evolving rapidly, and I will leverage my experience in strategy development and performance improvement to drive growth across our business. As you would expect, I'm also very consumer and brand-focused.
The a2 brand is in good shape and I look forward to investing in and developing it further. I'm also a big believer in the importance of constructive leadership and positive culture in an organization. Finally, I'm very focused on sustainability and finding ways to enroll the whole organization to have a positive impact on people and planet. I believe the experience I've acquired throughout my career has positioned me well to make an important contribution to a2. With your support, I look forward to realizing a2's full potential as your Managing Director and CEO. Thank you, and I'll hand back to the chairman.
Thank you, David. Are there any questions from shareholders concerning this resolution?
Chairman, there are no questions on this matter.
If there are no questions, I now propose that David Bortolussi, who retires at this meeting in accordance with the company's constitution, be elected as a director of the company. I put the motion to vote. Please now cast your vote. Thank you. Item four. In accordance with the company's constitution, Bessie Lee is retiring at this meeting, and being eligible offers herself for election. Bessie Lee sits on both the audit and risk management committee and the people and remuneration committees. Bessie's experience is set out in the notice of meeting. As I said earlier, Bessie has been a welcome addition to the board in only a relatively short time. However, during the latter part of this year, Bessie has been appointed as the CEO of a company in China, which is obviously a full-time role.
As a result, I'm very sorry to say that despite her contribution to the business, Bessie feels that she may be unable to commit her full-time and attention to her responsibilities as a director in the future, especially at this critical time for the company. As a result, while Bessie will stand for election as a director at this meeting, shareholders should be aware that she will remain as a director until such time as an appropriate alternative can be appointed, at which time she will stand down as a director. That said, I'm delighted to say that Bessie does not wish her involvement with the business to end, and she has agreed to remain an advisor to both the board and importantly to David Bortolussi as CEO, so he will still have access to Bessie's insights and experience in the future.
The board is already well on the way to finding a replacement director who will unquestionably have a similar experience profile in China as Bessie, and we will only let Bessie go when we've found someone of equal skill and talent. On this basis, I and the board recommend Bessie to you as a director of the company, and we unanimously support her election. I will now ask Bessie to say a few words. Over to you, Bessie.
Thank you, David. The a2 Milk Company is an amazing business, and I was delighted to have been appointed as a director in February 2021. My experience as a company director and an expert in digital marketing in China has equipped me to provide insights into the China market, especially during a period of heightened competition and increased focus in the online space to engage with our consumers. In accordance, in addition to these roles, I have founded marketing technology startup investment and incubation firm, and some of our portfolio companies have gone listed in China. I was the CEO of WPP China, which was the world's leading marketing communication group.
My expertise in marketing, mergers and acquisitions, as well as senior client and government relations, are a natural fit for the a2 Milk Company, the markets in which it operates, and the challenges that the business faces to adapt for growth in the coming years. As a humble recipient of the most innovative person in business in 2019 by the Entrepreneurs, Creatives, and Innovators associations, I'm highly focused on how to innovate in a rapidly changing consumer landscape in China. Innovation is one of the company's key priorities, key strategic priorities as announced at the recent Investor Strategy Day. I think my experience and skills will enable me to assist the company to achieve this priority in order to reach our ambition of rebuilding the a2 Milk Company into an exciting, innovative, and sustainable growth company.
I have thoroughly enjoyed serving on the a2 board these last few months. Thank you for the opportunity to seek election. As the chairman noted, I was recently appointed CEO of a company in Greater China, which is a significant commitment. As such, I shall remain as a director until an appropriate alternative can be appointed, at which time I will stand down from the board. Handing back to you, David. Thank you.
Thank you, Bessie. Are there any questions from shareholders concerning this resolution?
Chairman, there are no questions on this matter.
Thank you. I now propose that Bessie Lee, who retires at this meeting in accordance with the company's constitution, be elected as a director of the company. I put the motion to vote. Please now cast your votes. Thank you. Item 5 is the reelection of Warwick Every-Burns. In accordance with the company's constitution, Warwick Every-Burns is retiring at this meeting, and being eligible, offers himself for reelection. Warwick has been a director of the company since the 23rd of August, 2016. He is also Chair of the People and Remuneration Committee and a member of the Audit and Risk Committee. Warwick's experience is set out in the notice of meeting. I and the board recommend Warwick to you as a director of the company, and we unanimously support his reelection. I will now ask Warwick to say a few words. Over to you, Warwick.
Thank you, David. I was first appointed to the board of The a2 Milk Company, as David said, in August 2016, a little over five years ago, as a non-executive director and Chair of the People and Remuneration Committee. Over the past five years, I've seen the business transform during a period of exceptional growth and change. More recently, the business has experienced tremendous challenges during the unprecedented pandemic, as outlined by David, both Davids, in fact, earlier. These challenges have meant that the board and executive leadership team have had to rethink how we approach our strategy and deliver growth despite the macro headwinds. The business's ability to adapt during these challenging periods is testament to the exceptional people in the organization and the great a2 brand that continues to resonate with our consumers in key markets.
During my executive career, I held leadership roles with The Clorox Company, a U.S. Fortune 500 consumer packaged goods company, both in the USA as well as in the Asia Pacific region. I also gained extensive experience in the consumer packaged goods industry prior to The Clorox Company at Glad Products, where I was Managing Director, and earlier in my career at Unilever. The experience gained during my extensive executive career in consumer goods is highly relevant to The a2 Milk Company and to my role as Chair of the Board's People and Remuneration Committee, and as a member of the Audit and Risk Committee. I am also a non-executive director of one of the leading international wine companies, Treasury Wine Estates. Treasury Wine Estates has a large consumer base outside Australia, including China, Southeast Asia, and the USA, all very relevant to a2.
In the past few years, globally and locally, people issues, employee well-being, and remuneration have become increasingly important for companies and their investors. Our people are at the forefront of our success, and retaining top talent while also recruiting new talent is a key focus of mine. I'm delighted that Amanda Hart has joined the business in the role of Chief People Officer to lead our people strategy, which is fundamental to our success at The a2 Company. It is an honor to serve on the board of The a2 Milk Company, a role I thoroughly enjoy. Thank you for the opportunity to seek reelection. I confirm I have the capacity, commitment, and drive to continue to serve on the board of your company.
Thank you, Warwick. Are there any questions from shareholders concerning this resolution?
Chairman, there are no questions on this matter.
I now propose that Warwick Every-Burns, who retires at this meeting in accordance with the company's constitution, be reelected as a director of the company, and I put the motion to vote. Please cast your votes now. Thank you. That concludes the resolutions to be presented at the meeting. You may edit and submit your voting cards up to five minutes after the close of the meeting. As mentioned earlier, the votes will be tallied and the results available on the NZX and ASX following this meeting. We now move on to the general business. Are there any questions from shareholders on the general business as presented today?
Chairman, the first question comes from Basil Edmund McPhillips and Vera McPhillips. Why has the share price dropped so drastically? Was this due to poor management or overpaid directors and auditors? One suggested solution would be to sell off the business to another product company.
Well, thank you for the question, Basil. I hope that perhaps during my presentation and more, perhaps importantly, David's, you can see the reasons why the share price has dropped so drastically. It follows a significant fall in the short-term fortunes of the business, which were due to outside issues, primarily COVID and other headwinds in China, particularly more recently, the fall in the birth rates. These are both external issues that we have no control over. If I look back to say, "Why has the business fallen so far?" I don't fundamentally see that it was as a result of poor management or certainly overpaid directors and even less the auditors, who are not obviously involved in running the business at all. Fundamentally, the share price has fallen because the business fell in the short-term.
Now, it is our job to build it back. Frankly, the suggestion that maybe we should sell the business off to another product company, my view and certainly in my life, I've always attempted to sell high and buy low. So it doesn't feel to me like today is the right time to be selling the business on a low. So our job as directors, as management, most importantly, is to build the business back as far and as fast as we can and restore value that way. If ever the business is gonna be sold, it should be sold nearer the height of its performance rather than at the low end. Any other questions?
Chairman, the next question comes from Vitold Kozienski. How is it possible no director or company employee saw the fact that China was going to destroy the entire business when it was so obvious? A similar question has also been asked by Kevin Aldworth, who wants to know why the a2 board did not recognize the shift in market dynamics more quickly.
Well, let's talk about China. I don't think it's fair to say that China's destroyed the entire business. Be clear that five years ago, or 6.5 years ago, when I took over as chairman, the year before, the business actually only sold $108 million in a year. This year, supposedly, by virtue of the question, it's been destroyed completely, we're going to sell, we just sold $1.2 billion-$1.3 billion. You know, these are big numbers. The business has not been destroyed, let's be clear. In fact, we better, we need to recognize that China has been the provider of all of that growth.
I think David said it in his speech that the conundrum with China is it continues to represent the greatest opportunities for the business and the greatest risks. We've unfortunately, after five years of feeling all the benefits of the opportunities, we've now felt some of the risks. Now is not the time, in my view, to throw the baby out with the bath water. We have a NZD 1 billion a2 business in there now, and David has laid out a plan that we would like to get to NZD 2 billion, and the bulk of that NZD 2 billion is going to come from China. I don't think it's destroyed the entire business by any means, and I believe that the opportunities are still there.
It should be recognized, and David said this in his presentation, our market share in China, in total, is still less than 3%. We are still at the very early stages of development in our business there. The opportunities are immense, and it's not as if we've reached any form of maturity in China. I believe that while there are challenges, there will always be risks. The opportunities far outweigh those risks, and it would not be right to let go, as it were, and say that China is more destructive. It's not. China is our best opportunity. Why didn't we know that the shift in market dynamics any quicker?
The answer is, and I think I mentioned this, I've been in the food and the packaged goods industry for over 40 years as a CEO for 30 of them in various different businesses. I have never seen a market move as quickly as this has moved. It's not just that it changed dynamics. That happens in lots of markets. It's the speed that it moved that has been such a change. Particularly, the Chinese retail environment is highly entrepreneurial. The channel dynamics changed extremely quickly with it. To be honest with you, data in such a large and complex market is hard to come by in absolute secure terms. It's not as easy as it would be in Australia, where there are very few retailers, and they're very easy to see and measure.
When you have changes of that speed, which we've referred to, in a market as complex as China, you do not find the data doesn't appear at the speed you would like. You are, to some extent, inevitably playing a degree of catch-up, which is what we have done now. Any other questions?
Chairman, the next question comes from Vadham Nalini Pasgerundavardivel. What steps are being taken to improve the supply chain and increase the share price?
Well, I'm now gonna ask David to outline some of the details of this. But suffice to say, as David said, we have spent or the management has spent the last 4-5 months in an intensive review program, data collection program, investigation of all aspects of our business. It's based on that work that we have taken a number of actions to improve the supply chain, which ultimately we think will have a beneficial effect on the business, which is ultimately how you affect the share price. David, can I hand over to you to give some details?
Thanks, David. I assume the question relates to the inventory challenges and route to market difficulties we've had over the last 12 months or so. We've always known our own inventory held by the a2 Company, locally and also in China State Farm in terms of our China-label business, which China State Farm is our distributor in China for China-label. The inventory review that we undertook in April and May this year has provided us with greater transparency on the first level shipments through the supply chain. Our first level distributors in most of our channels, including the platforms that operate our e-commerce business in China as well.
What we don't have, which is very difficult to track, is beyond, in the reseller network, beyond the first level distributors, transparency over our stock levels there. We're always seeking to improve in that area. Another initiative that we've implemented is in terms of traceability of our inventory. We've had traceability on our China-label stock for some time now, but we've also implemented that for English-label, which will allow us to track at the end consumer level what channel that was initially shipped to, which will help with our channel compliance. We're also looking at our S&OP process, improving our forecast accuracy. There's a number of areas, operational areas that we're looking at improving.
Our strategy, as I mentioned before and outlined more in a more detailed way at our Investor Day, part of the initiatives in relation to that will be to streamline our routes to market in the reseller channel. We'll be working with our distributors to get more control over that and to get closer to our consumer. If the question related more to our operational supply chain, we'll continue to work with Synlait. We need to open up the opportunity for additional China-label registrations to enable us to innovate in China. We need to utilize our MVM facility that we purchased recently, and we'll also need to develop our capability in China supply chain over time. I think the last part of the question, David, relates to improving our share price.
As you mentioned before, you know, the primary focus of the management team, which I'm responsible for, is implementing our strategy and driving growth and performance improvement over time, which I would hope over time would be reflected in our share price. Thank you.
Thank you, David. I think it just is worth making the general point that while shareholders might think that our responsibility as a board is to drive the share price up, I would actually rephrase that or reformat that into saying our primary job as a management team and as a board, and we work hand in glove in this, is actually to drive the quality and size and performance of the business up. That will ultimately be reflected in a share price which is not in our gift. I think it's a great mistake if boards or management chase the share price per se. Our job is to chase the business, to improve it and grow it. I'm confident that over time, a business that does that will have its share price reflected or the value of its share price reflected. Any more questions?
Chairman, the next question comes from Martin Ross Vanderlinden. Have you got plans on the free cash flow you currently hold? Usually, debt is good for tax purposes. Why wouldn't you use your cash to buy something or invest in it in other countries?
It's a good question. I think I've covered some of it in principle in my initial address, but I mean, to be clear, we have used some of our cash to buy things and to invest in things. We've spent a great deal of money investing in stabilizing our relationship with Synlait by actually creating a formal stake in that business which solidifies that relationship. Not that it was unstable, but it solidifies it obviously in a much more concrete way. We've bought MVN, which is a significant investment to improve our supply chain, as David has just said, to actually give us access to owning our own licenses, which is actually the core value of our businesses. I mean, if you don't have licenses, you can't have a business in China.
We will aim, we'll end up being able to own our own licenses. We are investing in buying things in order to improve value. We constantly are looking for other opportunities. Obviously, it's not appropriate to discuss here what they might be, but you are right. We don't intend to look at our cash and count it in the bank. We intend to put it to good use. We've done that in the last year or two, so it's not empty rhetoric, and I'm sure we will do it again. One point I would make is that, you know, disruption in markets produces chaos to some extent and produces some risks. In my experience, almost always, disruption also throws up opportunities because new things become available that weren't before. Businesses change their stance.
Actually, it is that now is absolutely the time to have the cash to be able to do something with it that's appropriate, which may involve debt, or it may involve just our own cash. The question is absolutely right, and the board and the management are thinking and evaluating all those opportunities on a daily basis. Any other questions?
Chairman, the next question has been asked by Richard Ashton. Why has this company's board failed to conduct its policies with any clarity, consistency and ability? The share price plummet reflects your total inability.
Well, you might expect that I wouldn't necessarily agree with all the assumptions in that question, but I would like to hope that the presentations you've seen actually tell you that the reason why the share price has plummeted is the businesses or the effect on the business of absolutely external influences that are outside the control of any board or any management group. I would not agree that it, that the business, the share price plummet reflects our inability. That is just not, I don't think, factually correct. In terms of whether we've conducted our policies with clarity, consistency and ability, I leave somebody else to judge the ability the part of that question.
We spend a great deal of time, and indeed the purpose of conducting our policies through, among other things, the announcements made to the market on a regular basis, was in fact a desire for complete clarity and consistency. We spend a great deal of time, and I don't think there is any aspect of the policies, which is what this question is referring to. I don't think there is any aspect of the policies of the company that we have not implemented with clarity, consistency, and I would say ability, but it may be for others to judge. It is not those things that have caused the decline in the share price as a result of the business. Any other questions?
Chairman, the next question has been asked by Thomas Bottica. How do you think about the long-term price trajectory for a2 products? What factors will influence product pricing the most, and how much is in the control of a2, brand and marketing, et cetera, versus external factors, birthrates, competition, et cetera?
This is a very good question, and it's a very complex question which you could spend half a day answering. You'll be glad to know that we won't. What I would say is one of the measures of a brand's power, it's not the only measure by any means. One of the measures of a brand's power and connection with its consumers is its ability to price premium its products.
One of the things that gives me great confidence is that while there have been price pressures in the market, those are not in any way denigrating from the fact that the a2 Milk products, whether they're sold in liquid milk in Coles and Woolworths in Australia, whether they're sold in Walmart in the USA, or whether they're sold in China under IMF or liquid milk, we are able to sell the a2 brand at significant price premia wherever we sell. I think that is a fundamental plank of the company's performance and gives us and me great confidence that the underlying health of the brand is not in poor shape. Notwithstanding some of the things that you've mentioned in this question around, you know, brand marketing and, you know, competition, et cetera.
To deal with some of the detail and what influences what most, could I turn to David again, please?
Thanks, David. I agree. I mean, our brand is in incredibly good condition across all categories and markets in which we operate in. We produce, you know, high-quality products at an ultra-premium price point, and that's reflected in our consumer pricing. Our English-label IMF product has come under pressure over recent times due to the demand and supply volatility that we've talked about today, and we've taken steps to address that. As we covered before, we have taken steps to rebalance our inventory, to constrain our sales into the trade, to improve our product freshness, improve our stage mix across the range, and to invest in our brand to, again, bolster our brand equity.
Pleasingly, the outcome or result of these initiatives has been an improvement in our English-label pricing, and I tried to illustrate that on one of the pages in my presentation today. Even most recently in our 11/11 sales period, English-label was probably up around RMB 30 this year on average relative to last year. We're seeing positive trends in English-label pricing, which is fundamental to restoring channel economics. On China-label, there's been. You know, our brand is positioned as an ultra-premium brand, one of the top end in the in the market. There's been a positive trend in premiumization over many years in China.
More recently, due to the decline in the birth rate, excess inventory levels in the market, overall, not in our business, there's been increasing promotional activity and the average selling price across the market has come down somewhat, including our brand. What we're doing to address that is in the fourth quarter of last year, and particularly in the first quarter of this year, we are constraining our sales into the trade for China-label as well, and we're pulling back on promotional activity with our distributors and retailers, and we're seeing some improvement in China-label pricing as well, which is encouraging. Lastly, we will continue consistent with our strategy to invest in our brand and to innovate, which should support the premium nature of our brand going forward and support our pricing. Thanks, David.
Thank you. Any further questions?
Chairman, the next question has been asked by David Burke: What is the future of this company? What can shareholders hope for?
Well, you would expect me to say this, wouldn't you? I genuinely believe that this company has a very bright future, which may sound strange from, you know, some of the darkness that we've had to travel through this year. I look at the business and I say to myself, we're trading in the world's most complicated, but nevertheless, the world's largest market for infant formula, in which we have established a foothold, a strong foothold, with a brand that is already healthy and registering with consumers. We've got a place in that marketplace that is firmly established. It's worth noting that while our business might have been down 30% last year, our market shares have dropped a tiny bit, not in China-label.
In fact, in China-label, as I said in the presentation, we're the only brand, major brand of scale internationally that's grown share. We've grown share in China-label. We've dropped share a little bit in English-label. Actually, our shares are, you know, almost there or thereabouts. They've fallen a couple of points. They would say 10 basis points. You know, 0.1 of a share, 0.2 of a share. We've not seen enormous share decline. Most of our decline in business is not a result of lost share, it's a result of lost market. The market is not there at the moment. I believe this future is still enormously bright.
As David said in his long-term estimate, it is not impossible to see this business doubling in share terms at all. If you do that, you don't need to see the math to say that's a very attractive opportunity. I genuinely believe, and we've talked about or David's talked about a NZD 2 billion business within five years or five years around. You know, there is a huge future ahead of us. I don't think we will see, if I'm honest, the spectacular levels of growth year-on-year that we saw in the previous four or five years leading up to last year. Those were truly exceptional times. We're going to see good levels of growth, I believe, strong levels of potential exploitation of our position.
With the addition of innovation that David's referred to, I think it's a bright future for the business. In the end, that's all we can control. If we can do our job there, then the shareholders will find reward because the share price will inevitably reflect that success. I do not believe, despite the challenges, that there are any fewer opportunities. Indeed, there may even be more as we go forward. It's our job now to get out and start to realize those. Any more?
Chairman, the next question has been asked by Susan Robinson. Since A2 is an A2 protein company, why doesn't A2 consider diversifying into other A2 protein milk, such as goat or sheep milk?
Well, I'm not in a position to discuss what we may or may not do in the future, but it's a very good question. Again, we are an A2 protein company. We chose to exploit the a2 protein difference in milk. As you rightly say, Susan, goat and sheep milk is also A2 milk, and it's therefore an obvious area where we know we are looking, have looked, and at some point in time, no doubt it may become a realistic opportunity. It is worth saying that both those categories are, by comparison to cow's milk products, very, very small. In a world where we're trying to deal with the big challenges of China, it's not about saying whether there is or isn't an opportunity, it's about prioritizing our efforts to go for where the big opportunities are in the short term.
David and his team are rightly focusing on fixing our issues in China and capturing the opportunities in China, any one of which will dwarf the opportunities just in sheer size that goat or sheep milk might present in the short term. Having said that, they are interesting opportunities. They are growing quite strongly, which reflects growing consumer acceptance of the a2 proposition, and we will continue to evaluate whether there are opportunities to expand in those areas in the future. David, is there anything you want to add to that, or have I covered it?
I think in our investor day, we did actually highlight these two categories as being potentially of interest in the future, David. The sheep and goat are small, fast-growing categories that are A2-like in their nature. We won't play in conventional milk categories, but as David said, the primary focus for us at the moment is on the bovine A2 category. We see enormous opportunity there that will remain open across our categories to sheep and goat as potential opportunities.
Thank you. Any other questions?
Chairman, the next question comes from Bruce, and apologies, I don't have Bruce's last name. The question is, does the board consider the current share price undervalued? If so, why are we not allocating capital for buyback to help negate the millions of future employee right shares that will be issued in the coming years? Why should we be confident in the board's ability to allocate capital to actually return value to shareholders?
Another interesting question. Firstly, let me just say, I don't think it's the board position to comment on whether the share price is valued too highly or too low. As I say, the market ultimately determines how it places a value on the business we have. It is not surprising, given the turmoil we've gone through, that the share price has taken a hit. That is perfectly understandable and reasonable, even if it is painful. And believe you me, I do understand that it is painful. I don't think it's right for me to comment on whether the share price is valued correctly or not correctly.
In terms of the last part of the question, which I think is the really important part, why should we be confident, I think you said in the board's ability to allocate capital to the benefit of shareholders. I would argue, and if you look over our recent five, six, seven years, I would take the five or six years that I've been chairman. I think we've demonstrated year in, year out, that we've allocated capital very wisely to develop extremely strong shareholder returns. I think we've got a long track record, and I think it's not fair, you know, to take a cricket analogy.
It's not fair if somebody gets out in a duck, you know, it's no good turning around and saying after a career of many hundreds of runs to say, "Well, they've obviously lost the ability to score. They didn't score that year." Yes, at the moment, you know, we're suffering from a diminution in shareholder value. I don't think that's a result of misallocation of capital at all, and I think our long-run track record is very good, and I would be prepared to stand by it. Thank you.
Chairman, the next question has been asked by Daniel Lycaon. How do you see the future of the Daigou channel and the trading environment with China? Do you anticipate that it will return to pre-pandemic levels?
I think the best person to answer that is David.
Maybe referring to the total English-label business, which, as a category or a channel, has declined by around 40% over the COVID period, and we've lost a few percentage points of share within that. In terms of the trading environment in China, it's getting more challenging 'cause the birth rate has come off and the volume growth in the market is down overall and value is down for the first time for a total market, in a long time, I think, in recent history. It's getting more challenging. We are hopeful of a recovery in the English-label channels. When referring to the Daigou channel, I pointed out in my address that that channel has evolved significantly over time.
It is more or less a significant e-commerce business, both in closed C2C business as well as open trading on e-commerce platforms. The O2O or offline to online channel is an interesting growth opportunity for us as well. Overall, we are expecting that the channel will regain some of its size and prominence in the market over time, and that we will gain share and increase to around 25% share of the channel. Overall, what that means is that we're currently in our plans over the next five or more years, we're expecting the English-label or Daigou related channels to recover to about half of the pre-pandemic levels. That's what we're assuming at the moment.
It's quite possible that it may exceed those expectations and we've clearly sort of discussed that in our Investor Day recently. The moment we're assuming it will recover to around half of what it was.
Thank you, David. Any more questions?
Chairman, this next question comes from Kieran Bala. At the AGM two years ago, I spoke with you, Chairman, about the results of the U.S. operations. I note that this segment continues to report significant operating losses. When will this segment be profitable?
You raise a very important question for the business and for the management team and for the board, and it is fair to say that the performance overall, not just the profitability or lack of it, but the whole performance of the US business is the subject of a debate at every board meeting. It is a strong priority, and I will turn to David in a second to talk about it. He has laid out a timetable which is, he believes, realistic to move towards breakeven in that business. It's fair to say that mitigating the losses, reducing those losses along the way and getting to that point as fast as possible is a very significant priority for the business. You know, you're absolutely right.
It is producing significant operating losses at the moment, at a time when the business can afford those losses less than it could have done some years ago. It is rightly a focus of board and management attention. I'll turn to David to give the specific answers as to how and when that may be possible.
First of all, let me just preface this by saying that I think the team has done a great job in the U.S. in building our brand over recent years and building national distribution for the a2 Milk brand in the U.S., which it was a difficult task in a very competitive market. The business is in growth. Last year's financial result, the reported number is a small decline in New Zealand dollars, but in local currency the business was still in growth. The question is absolutely right. We lost $50 million a year before last and around $30 million in the past financial year, and we're very focused on achieving profitability, and we've said that we'll get there by FY 2026 or earlier.
The challenge we have is the business is subscale in terms of top line, and we're focusing on driving growth in our core white milk business through improving velocity and incrementally improving our distribution, as well as driving innovation. I think our Half & Half recent product release and the Hershey's collaboration and license arrangement that we have is a good example of how we're seeking to drive the top line. The other challenge that we have is around our margin structures, because our cost of goods sold is a challenge where our delivered margin is not as attractive as we'd like it to be. We have those two challenges to work on over time. We're developing a plan for that at the moment. Ultimately, if we can't get confidence in the risk-return profile of that plan, then we will consider other options.
Currently, we're working on driving the business in growth and profit improvement. Thank you, David.
Thank you. Any other questions?
Chairman, this next question comes from Nicholas Abucata. Slide 11 in the annual meeting presentation indicates that your unprompted brand awareness in China is only 14%. What are you doing to address this?
Well, again, I will ask David to comment on this in a minute. I would just make one observation after being in the marketing business from my time as a graduate trainee right through to today. Awareness is a strange measure or a measure that sometimes looks odd and unprompted brand awareness, even in big markets with big brands, is often surprisingly lower than you would think. I'm not suggesting 14% is great, but some of the very, very powerful brands in markets may only have unprompted brand awareness in the 20s and 30s, even though they and us would have prompted brand awarenesses, which is when you say, "Do you know this brand? Do you know that brand? Do you know the other brand?" As opposed to which brands do you know?
You're relying on people to remember them. You can imagine if you think about that, if somebody says, "Can you give me five, you know, Beatles hits?" A lot of people can't remember a lot of them. If you say to them, "Do you remember the song, you know, whatever," it's a different question. You shouldn't be overly put off by a number like 14%, although of course, we need to move it up. I'll turn it to David to comment on that point.
Thanks, David. Fourteen percent is the unprompted number. The total brand awareness is just under 50%. To David's point, the competitive, market-leading brands in China are between about, in terms of unprompted awareness, between about 25% and 45%. Our unprompted awareness has been improving over the years. What we're doing to drive that further over time is we're increasing our level of brand investment in total. In particular, we will ramp up our above-the-line brand, consumer brand sort of investment, particularly in digital marketing. But we'll also continue to invest below the line as well, which has been very successful in China.
For example, we ran just under 1,000 roadshows, which are big consumer events in shopping malls and other venues in China last year. We conducted over 40,000 mama classes, which are smaller group events to educate consumers on the advantages of the a2 brand. We have invested in 4,500 brand ambassadors in store in retail in China to promote our brand and to assist consumers with their selection. We've also invested in store fit outs as well. We've invested in over 100 flagship store fit outs last year as well. There's a lot of investment going on in our China-label business to raise our brand awareness.
Obviously, in the past, the Daigou channel has been very effective in building our brand through word of mouth, and we're hoping that the initiatives that we've taken during the course of this year to support the channel will help engage more Daigou in the channel and promote the brand through word of mouth and e-commerce as well. There's some of the initiatives that we're doing. It's really important that we do drive that brand awareness up over time and become one of the handful of brands that consumers have top of mind. Because once a consumer is aware, we have very high conversion through the funnel, and they become loyal advocates of the a2 brand. It's a great question, and it's definitely an area of focus for us going forward. Thank you, David.
Thank you. Any other questions?
Chairman, this next question comes from Xing Yu. What types of innovation and data-gathering IP will you be investing in or have already invested in that will strengthen the position of a2 Milk's future?
This is definitely a question for David. I'm not seeking to avoid answering them, but David is the right person to answer these sorts of questions about the operations in the business. I'm gonna pass this over to David to handle, please.
There's a couple aspects to this question. On data gathering and IP. We've invested in a data analytics team in China, and we're really developing our capability there, and I think it's a really great capability analyzing all of the market trends that we have that are relevant to our business and providing insight to help decision-making. We've also invested heavily in consumer insights in our brand through our brand health tracker and also specific projects when we're trying to ascertain what are the real consumer needs that we're trying to meet going forward. That's another area of investment that we have ramped up over recent years.
Lastly, in terms of innovation, from a product innovation perspective, I didn't have a chance to talk about that today in my address, but if you go back to our investor day materials, you'll see in China-label in particular, you will see how much the market has innovated in terms of our competitors in product offerings. You know, the a2 Company has been incredibly successful with one brand and two labels in the China IMF market for such a long period of time that innovation hasn't been a priority. It's clear that we need to focus on that going forward to appeal to a greater set of consumers and more consumer segments and to expand our distribution over time.
The problem is we're starting largely from a standing start in respect to that, but it's absolutely a focus of myself and the full management team on ramping up our product innovation going forward, and you can see that reflected in our strategy. Thank you.
Thank you. Any more, David?
Chairman, the next question has been asked by Enrique R.K. Miranda. How has the board minimized or managed possible exchange rate fluctuations?
This is another good question. There are a couple of things, and again, I'll pass to David to discuss some of the things we're looking at going forward. It's fair to say that in the past, we have been blessed by having a relatively significant set of natural hedges in place, by virtue of product sourced out of New Zealand, sold into Australia, also sold into China. Our sales from New Zealand to China are sold in US currency, which has a natural hedge against our US business. We've had quite strong natural hedges in place, which has been our main strategy. Going forward, however, with fluctuations there, we are also looking at other possible mitigation routes.
Again, I will ask David to comment, and he may or may not choose to ask Rhys as well, I don't know.
No, it's a great question. David's right. Over time, it appears that our transactional currency exposure has increased quite significantly. We have a significant New Zealand dollar to U.S. dollar cross rate exposure related to our CBEC business in English-label as well as our China-label business, which both are denominated in U.S. dollars. The reseller business is largely done through creates an exposure with the Australian dollar, and we have translation risk around the world. The acquisition of MVM also brings further currency risks to the business as well.
We've actually been reviewing this, as with the board and with the management team, and we are about to embark on a program of mitigating some of that risk through fairly vanilla, straightforward FX hedging by buying forward contracts to mitigate part of that risk over time. We won't be speculating in any way, but hopefully, that'll reduce some of the volatility in our P&L. We might have a bit more to say about that at the half year or the full year going forward. Thank you.
Thank you. Any more?
Chairman, the next question has been asked by Carlos G. It was nearly four years since the partnership with Fonterra was announced. So far, progress is not great. Can anything be expected in the future from this partnership?
It's a good question, and I think it's fair to say that both Fonterra and ourselves would say that some of the optimism we had when we set about or put in place this announcement and relationship, which was pretty historic. I mean, for those of you who know the company well, have been with us for a long, long time, you'll remember that, you know, at the early days of the company's history, the two companies were suing each other. It's quite a turn from there to forming a strategic partnership. I think we had higher hopes. I think what we would both say is we're slightly disappointed that it hasn't been more productive.
I think the lesson we both learned from it is that Fonterra is one of the world's larger consumer goods companies with sales measured in tens of billions NZD. They think in very large terms. Their factories are large, their big customers are very large, and they think in a sort of an order of magnitude that a specialist niche business like ours just doesn't. I think that imbalance has made capturing opportunities that make sense to both partners more challenging than we might have wanted or might have thought of to start with. Because those things that appeal to us are not necessarily moving the needle for them as much as they would like, and completely the reverse is true. The things that they would like to do move their needle, you know, might drown us.
We are working through the relationship. Where it is functioning, it's functioning well. Relationships at the top of the company are cordial and positive. I think there is work to be done, and I think both parties would agree that there is work to be done to see if we can actually find a path somewhere in here that gives both parties something more. The willingness is there. I think there is a gradual recognition that the scale of the companies, and therefore the culture of the companies is sufficiently different, that realizing those opportunities is more challenging. I can't promise anything, but I can promise that efforts are continuing to find something. Any more?
Chairman, the next question's been asked by Eva Kowal, Francis K. Middleton, and Kevin Aldworth, and it's with respect to diversifying business operations away from China. More specifically, given the risk profile of operating in China, what is the company's strategy for expansion into other countries? This includes, for example, distribution of infant formula products in the U.S., Canada, and Japan.
This is a very, very good question, and one that has exercised the board for every year that I have been on the board since our China business became a significant component of our business and now the dominant component. It is clear that, you know, one view of the world is that we need to diversify away from that risk, and we need to find those opportunities. The challenge is that the opportunities are so big in China, that every opportunity you see outside in the medium to short term is dwarfed by the potential in a given year of what you could get out of China.
In fact, those of you who may recall things I have said very early on in my chairmanship, I made the somewhat witty remark, I thought that the problem with this business was we were a one country, one product business in that we sold liquid milk in Australia, and we ought to diversify away from that and improve our business. We did that by selling infant formula in China. Five years later, we found ourselves as a one product, one country company, just we changed the product and the country. This is the challenge. You know, why are we in the U.S. business at all? The U.S. business, the U.S. market is the largest consumer goods market in the world.
It offers enormous opportunity to those who are successful, but it is the most competitive and challenging because it's the biggest consumer goods market in the world. You know, we went there for that very reason. You are absolutely right, and we are constantly trying to balance off as a board and as a management team, the opportunities to place capital and resource, and in our case, we're not capital constrained, we are more human resource and time-constrained. That is a constant battle. The second part of this is, given where we are right now and today in China, the opportunity to correct the challenges that have faced us this year and move forward are so high as a priority that David and his team have rightly said we should be focusing on that first and foremost.
We have a business in America. You've heard David refer to its role and our desire to make it profitable and to move that business forward. Over time, for sure, diversification of risk is an important component of our strategy. It's probably, if truth were known, more likely to happen through innovation and product expansion in the medium term than it is through geographic expansion. Going into Japan, you know, on a cold start is a very expensive, lengthy business. I'm picking Japan as just an example because you happen to mention it.
You know, I think that's what we will continue to look at it, but the challenges we have at the moment are so significant that we need to focus on those first, and only when we fix those can we look elsewhere. Then the challenge, even when we fix them, is to balance off where are the opportunities best suited for shareholders to get best returns. You ask a very pertinent question. You can be assured that the board have considered it and do consider it regularly. It's not one of those simple answers, I'm afraid. It's like all these things, it's a balance. Next question, if I may.
Hearn, following the question on regional diversification, Kay Bright would like to know whether we have considered product diversification into the yogurt and cheese market for kids and infants.
Well, David has referred to the value of innovation in the business and the focus on ensuring that in the next three years, five years. If the last five years have been about building a monumental business in the infant formula market, the next five years will be also about complementing that with innovative initiatives in other markets. The answer is absolutely. We have discussed a strategy we have called macro milk, which is to say what are the other sectors in which an a2 protein-based dairy product could have relevance, and clearly the ones you mentioned there are two of the areas that might be of interest. We're clearly thinking about going up different ages. If we're in infant formulas today, what other areas might there be that could be useful?
You can assume that the innovation program that David and the marketing team are putting in place will be looking at these issues and lots of others related to what we are calling Macro Milk, which is anything to do with dairy products with an A2 component. Next one, please.
Chairman, this next question comes from Max Bauer. Could we please have a brief comment on the competitor companies now beginning to focus on milk from a2 cows? Related questions are from Oliver Fong and Victor, asking about what steps the company is taking to maintain its brand power and or protect its IP. Thank you.
Two different questions, obviously related, but quite different. Let me make some comments, if I may. The first thing to say is that we would expect, and it is ultimately, I mean, the witticism is always flattery is the sincerest form of a compliment. But, sorry, copying is the sincerest form of flattery. We would expect, given our success, in China and in Australia, we would expect people to come along and seek to replicate it. They have done, and in large numbers.
I think it's also fair to say that if you look at the companies that have taken an a2-based product and put it into their range, and they include some of the best consumer goods companies in the world, Nestlé, Danone, in the case of China, Feihe, who are a very strong brand, local brand in China. These people have put an a2 product in their range, and it has singularly failed to really register much success. You have to ask yourself why. I think there are a couple of reasons. The first is they have got the a2 brand as a variant, somewhat, as one might say, you know, a new banana flavored variant, as it were, not literally banana flavored. You understand what I'm saying? It's just like another variant.
Whereas we are not selling the a2 brand as a variant. The a2 brand is our DNA. That's what we are. That's who we are. If you look at businesses that build themselves on a proposition like that, it actually in some ways works to their advantage when other companies come in because, A, it confirms that the category makes sense, and nobody's arguing now whether the a2 proposition has any value, 'cause everybody's got one. Well, not everybody, but people have. But secondly, we continue to hold in consumers' minds the primary asset, which is that we understand this and this is our business. And I have often in the past likened this to Dyson vacuum cleaners. Dyson invented cyclonic vacuum cleaners, and within a very short period of time, every major brand of vacuum cleaner had a cyclonic version.
Indeed, most companies have now converted, if not all, a large part of their vacuum cleaning range to cyclonic. Dyson's business has never been stronger because they are known as the innovators, the people who have got cyclonic vacuum cleaners in their DNA. That could apply to Kleenex tissues, it could apply to Vaseline, it could apply to all sorts of things. My instinct is that actually other brands launching the a2 business in variant forms will be helpful to us. It'll grow the category, it'll grow consumer acceptance, and we, as the dominant player, will actually benefit more than we will lose for it. The evidence is certainly that that's true because they've not been able to make a great success. They, of course, are also challenged by the fact that they have a very large A1 business.
They are not really able to market the A2 variant very strongly, because if you market the A2 variant as better than A1, you have to ask yourself, if most of your business is in A1, what is that saying about the rest of your range? They are immediately hobbled a little bit in saying what they might like to say about the A2 variants they sell, and we therefore continue to own the territory. That I think is a very important point. I don't belittle competition. I don't suggest that we can say that we shouldn't be taking notice of Nestlé or Feihe or anybody else or Danone, but I'm not scared by them either, because I think we own this proposition in a way that they will never be able to take away from us.
It's our job then to make commercial success of that ownership. In terms of what are we doing to maintain our brand power and or protect our IP, we have a strong program of continuing to expand our patent portfolio. We continue to therefore invest in science, primary science, and in developing patent protection. It's interesting that we have not seen enormous challenges to those patents. We have an active program to continue to develop the science further. As we go into innovation, as David has mentioned, in other categories, we'll no doubt need to develop further science for the relevance of the a2 protein in that particular category. We are active developers of our IP. We're not sitting on our laurels. We have 13 families of patents currently in existence.
I've no doubt we'll be adding to those in the future as we have done in the past. Any more?
Chairman, the next question has been asked by Vas Osman. What's been done to ease the restrictions imposed on how many IMF cans can be purchased by consumers and sent to China? If the demand is there, why the restrictions when supply is clearly available?
Well, it's not our job. It's not in our gift. If the Chinese government decide to put restrictions on how many cans can be put through, as it were, as a domestic import as opposed to a commercial enterprise, that's their decision. I don't think actually that's particularly relevant for our business. As David mentioned, the Daigou business, which was originally, I think he referred to it in his presentation, as originally a suitcase business, which was individual consumers buying it up and putting in suitcases and walking it across or flying it across. It has moved substantially into a much more organized and professional channel. I don't think these restrictions are a material impact on our business.
I don't think it might have been some time ago, but the nature of the way Daigou has moved is not a particularly significant restriction. Certainly one of the advantages of such a complex and deep distribution channel system in China is that there's product available in so many different ways. I don't think there's much evidence that a consumer who wants to buy A2 can't find it. He or she can get it online in the big Tmall, Alibaba channels. He can get it in local online channels in Chinese markets. He can get it in mother and baby stores. He can buy it through Daigous.
There are many, many channels that they can buy it from, and I don't think there's much evidence that we're losing sales because one particular channel may or may not have enough supply. That's not our problem at the moment. Okay. Any other questions?
Chairman, there are a few more questions that we've received, but unfortunately we have run out of time for today.
Indeed, we have. Forgive me. Just before I close, I hope what we've been able to do is deal with the bulk of the questions you have asked. I would actually just like to make a comment that I think the quality and insight of the questions has been very high. They are good questions to ask. I say that not least of which is they're the questions that the board have been asking ourselves and the management. I commend the questions and we're thinking about the business. You're thinking about the business in much the same way we are. Whilst all the answers aren't easy, at least if we agree on the right questions, there's a good chance we'll get to the right answers in time. I am very encouraged by what we've had today.
We've had a long meeting, two hours, which is more than the time I originally said we would do. I just want to thank you for the quality of the, and the perception of the questions. Before I close, I would like to thank you, our shareholders, for your patience and your commitment to our business. We understand that the current times we're living in require great patience and commitment, and I don't take those things lightly, I assure you. A great company like The a2 Milk Company is not built in a short time. Equally, it's very important for us all to recognize it's not damaged beyond repair in a single blow either.
We've had years and years of success in this market, and one year of this sort of challenge does not undo all of that, and we should never lose sight of that. We have the ingredients for success in this market. We have a powerful and differentiated brand. We have a strong financial position, which gives us resilience under pressure and the ability to go after the opportunities in the future. We have a dedicated and talented senior management team who are fresh on the job in many cases, and who are determined to prove our critics wrong. A group of highly powerful and well-connected Chinese partners with whom we've built excellent relationships over many years, and that's very important in China.
We all know that the Chinese have a different view of time than we do in the West, and they look for extended relationships over many years, and you don't build those in a heartbeat either. Finally, we have a set of plans for the future that are built on a solid foundation and an understanding of the drivers of our business. All these components give us the confidence that the future is most definitely brighter than our most recent past. Thank you to everybody here today for embracing the technology, which I know is challenging, and attending virtually for your time, excuse me, and most importantly, for your support for the business. I now formally declare this meeting closed. Thank you and good afternoon.