Thursday, July 7, 2022

A2 Corporation includes UHT, powders in strategy

Chinese infant formula and the United Kingdom fresh milk market are to be a key focus of A2 Corporation’s marketing over coming years.

In an announcement to the NZX Alternative market last week, the company highlighted some key areas of focus for growth in coming years that have come from a recent strategic review.

That focus comes on the back of rocketing Australian growth in the A2 brand, with its quarterly sales growing from A$1.7 million a quarter in March 2008, to A$15m this quarter.

Despite punishing fresh milk wars on conventional product between supermarkets, A2 has continued to command a 150% premium throughout the year over generic brands.

It is now the fastest growing and largest brand in the Australian premium milk sector.

A2 Corporation managing director Geoffrey Babidge said he was confident the company could replicate that success in the United Kingdom, with the brand kicking off sales there this month.

The company has formed a 50:50 joint venture with Robert Wiseman Dairies, the largest dairy processor in the UK.

Dairy herds containing the A2 beta casein gene have been identified for supply and the launch will be through 700 supermarket outlets of three major chains.

“Just like the New Zealand and Australian markets, 25% of the population will have issues with dairy sensitivity and intolerance. Most will say they are lactose intolerant when in reality they are intolerant to the A1 protein,” Babidge said.

He sees a successful launch of A2 in the UK providing the platform to expand the range of products on offer, and into the European market.

In China consumers’ desire for source processed and canned infant formula has the company working here with Synlait to collect, process and can A2 infant formula.

“This is the premium end of the market. Being part manufactured in another country and canned in China does not command the same premium, given food safety concerns.”

While many international companies and Fonterra are establishing raw milk supply bases in China, Babidge said A2’s strategic review indicated the UHT milk market with supply out of NZ and Australia remained a priority over fresh supply there.

The Chinese UHT market is valued at US$8 billion and A2 has secured a distribution network through China State Farm Holding Shanghai Company (CSF), a subsidiary of China’s only SOE operating in agricultural production and fisheries.

Here at home A2 has enjoyed only a fraction of the Australian market’s growth and supply to the South Island remains sporadic.

However, Babidge is confident a change in distribution channels will rectify this with A2 as a corporation being more engaged in the distribution with processor Fresha Valley.

The company has also defined a clutch of “seven families” patents to protect its IP. These span cow genotyping for the A2 gene, through to processing.

“The patents give us ‘first mover’ advantage and some extend out to 2033,” Babidge said.

The NZAX listed company has enjoyed a rise in share value of 179% from 24c to 67c this calendar year.

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