China, US drive a2 Milk fortune
The seemingly unstoppable rise in fortunes for The a2 Milk Company continues to be driven by sales in China and the United States, as well as alliances with New Zealand milk giant Fonterra and Canterburybased independent Synlait Milk.
The marketing company’s total revenue rose a whopping
68 per cent to $922 million, and profit after tax more than doubled to $195m in the
12 months ended in June 2018. New chief executive Jayne Hrdlicka expected more growth in China, where the company has doubled its market share of nutritional baby formula from
2.8 per cent to 5.1 per cent. The number of outlets where Chinese consumers could buy the company’s milk had increased from 3800 to 10,000 stores, and it could also be ordered online, she said. Responding to queries from
chief financial officer Craig Louttit said the company held worldwide patents that had lifespans varying between five and 15 years. He declined to give details for ‘‘commercially sensitive’’ reasons.
Hrdlicka said farmers were certified by the companies such as Fonterra and Synlait that supplied milk products to The a2 Milk Company, which had invested in a new ‘‘unifying brand trademark applied across all products and markets’’.
The company was minimising the risk of product substitution and counterfeit, particularly for infant formula in China, with improved security technology.
It had launched three new milk powder products, including one blended with ma¯ nuka honey that was packed by Fonterra.
Hrdlicka said the 2018 financial year was ‘‘transformative’’.
She acknowledged the emergence of Nestle in the Chinese market as ‘‘the first signs of competition from a major international company’’. However, she added: ‘‘There has been no apparent impact on our sales momentum.’’
A clinical trial in China involving 600 adults with selfreported lactose intolerance found consumption of cow’s milk containing the A2 protein type reduced acute gastrointestinal symptoms. A pilot study in New Zealand was being submitted for publication.
The strategic deal with Fonterra struck earlier this year incorporated an exclusive nutritional powder agreement, with Fonterra manufacturing a2 Milk products in Australia, Southeast Asia and the Middle East.
Earlier this month The a2 Milk Company invested $162.3m in Synlait Milk shares, to lift its shareholding to 17.4 per cent.
In Australia, the company’s fresh-milk market share by value grew from 9.3 per cent to 9.8 per cent. Its US business grew thanks to an increase in distribution via 6000 stores in California, the southeast, the northeast, the mid-Atlantic and through retail chains including Whole Foods Market.
Sales also lifted in the United Kingdom but it remained a more challenging market.
The company’s share price remained steady at $11.30, well ahead of the $5 price a year ago, but shy of the high of the $13.99 recorded in March.