Baby formula products are in red-hot demand, and it's easy to see why…

According to a report from news.com.au, Chinese individuals known as "daigou", which translates to 'buyer's agent' or 'buying on behalf of', are raking in six-figure salaries, well above the income for the average Australian citizen.

By buying tins of the infant and baby formula aka "white gold" from local supermarket and pharmacy shelves, they then on-sell them to China via various online media platforms and online shopping sites like Tmall.com and Taobao.com for a significant profit. Some estimates suggest they're sold online for as much as five times their local retail price.

Sales have been particularly strong recently due to China's online shopping event 'Singles Day' (which is happening today) while the scrapping of China's one-child policy could also be playing a role. Indeed, Credit Suisse estimates that this could add an extra six million new births every year by 2017, creating an enormous growth opportunity for the companies producing it.

Indeed, for the producers themselves, being unable to keep up with demand is a great problem to have. Demand for Bellamy's Australia Ltd (ASX: BAL) branded products is skyrocketing with the company itself predicting that up to 40% of its products sold locally are actually purchased for the benefit of people overseas.

Blackmores Limited (ASX: BKL) is keen to get in on the action too, announcing plans to enter the baby formula business, while OnCard International Limited (ASX: ONC) could also be headed that way, having recently announced the acquisition of dairy business, The Van Diemen's Land Company. Clover Corporation Limited (ASX: CLV) shares have also jumped 21%, with the company producing a range of ingredients used in baby and infant formula.

However, while parents tend to stick with products that work for their children (and Bellamy's is very popular with kids, and thus with parents), if the supply isn't there, consumers will be forced to buy tins from rivals. Although excess demand is always encouraging, it is a problem that will need to be resolved nonetheless.

In saying that, it could also be something that the supermarkets themselves can lend a hand with. Woolworths Limited (ASX: WOW) currently has an eight can limit per transaction on baby formula, although it's questionable how well this is enforced. Coles, owned by Wesfarmers Ltd (ASX: WES), also has a transaction limit with the company also experiencing mass-selling of baby formula products.

Bellamy's share price rose another 2.7% today to $9.84 after hitting a new all-time high of $10.32 earlier in the session. Although they have risen a remarkable 496% since the beginning of the year, there could still be more gains to be made in the long-run.

The post The big reason why baby formula is so hot right now… appeared first on The Motley Fool Australia.

Shares of Bellamy's Australia Ltd (ASX: BAL) are exploding again today. They're up another 9.2% to $9.61, giving them a total gain of 19.8% since the beginning of the month and 482% since the start of 2015.

Bellamy's has enjoyed incredible success since the company listed its shares on the ASX in August last year. The group reported a 153% increase in sales and a whopping 617% increase in net profit during the 2015 financial year, reflecting the demand and popularity for its products.

More recently however, it appears to be China's scrapping of its 35-year old one-child policy that has spurred demand for Bellamy's shares, combined with numerous media reports recently regarding the struggles local consumers have had in locating and purchasing baby formula products.

It is believed that many of the tins being purchased locally are actually then being sold to overseas customers, particularly those in China for the upcoming 'Singles Day' online shopping event, highlighting that demand is far exceeding supply right now. It's a good problem to have, but a problem that Bellamy's (and other producers) will need to resolve, nonetheless.

The excitement surrounding the baby formula market is clear. While Bellamy's share price is exploding, Blackmores Limited (ASX: BKL) recently broke through the $200 per share mark when it announced a partnership with Bega Cheese Ltd (ASX: BGA) to develop new baby formula products.

Notably, Bega Cheese also hit a new all-time high share price recently, while OnCard International Limited (ASX: ONC) is also soaring higher after it announced the acquisition of a Tasmania-based dairy producer. The shares rose as much as 49% this morning to 85 cents, after trading at just 30 cents recently.

Indeed, although there could still be gains to be made, investors should ensure that they do their due diligence on each company before they decide to buy shares, rather than simply buying into the hype.

The post Why the Bellamy's Australia Ltd share price has exploded today appeared first on The Motley Fool Australia.