Everyone you meet now seems to be lactose intolerant, gluten intolerant and allergic to anything except green protein shakes (with kale, naturally) – but The a2 Milk Company must be doing something right as it’s totally and udderly smashing its competitors.
Sales were up 84% v the prior period for the half ending December 2016 due to booming infant formula and whole milk powder sales and a continuation of growth of a2 Milk™ branded fresh milk.
In February, the business reported its first-half profit after tax had almost quadrupled to NZ$39.4 million (up from NZ$10.1 million in the prior period). Since then, the share price has peaked at an all-time high of A$2.99.
And not only is a2 Milk™ the fastest-growing and leading premiumfresh milk brand in Australia, the Chinese arm of the business is also soaring. In fact, its a2 Platinum® infant formula is so coveted, Chinese mothers were, literally, fighting in the supermarket aisles to get their mitts on it in 2015.
“It’s crazy, quite unbelievable,” says Shareef Khan, General Manager of Group Operations. “People are really wanting this brand and doing whatever it takes to get hold of it.”
Sales increased by 62 percent in Australia and 348 percent in China, creaming a combined EBITDA return of NZ$35.7 million, and Khan – who was formerly the supply chain director for one of The a2 Milk Company’s baby formula rivals, Nutricia – played a huge part in this.
Bringing his expertise of more than 12 years in the nutrition industry Khan, who is also on the board of the Infant Nutrition Council, has been involved in the baby formula side across everything, from conception to point-of-sale.
“We’ve gone from a zero base of infant nutrition to it being a significant player not only in Australia but the China market,” he adds. “And it’s continually evolving and growing. I would say that’s one of my main achievements.”
And it looks like the high demand is set to continue. Due to China recently abolishing its one-child policy, it’s predicted an extra 10 million babies will be born within the next few years.
Khan says: “There are more than 100 farms that supply us globally, including in Australia, New Zealand, the UK and the US. We supply fresh milk to all of those markets, and have extended our product mix in Australia.”
So, what is it that’s so special about The a2 Milk Company, whose slogan is “Feel the Difference”?
It was founded in 2000 by Dr Corran McLachlan who, whilst studying at Cambridge University, learned that proteins in milk affect people differently. Ordinary cows produce milk with different beta-casein protein types, called A1 and A2 (among others).
He discovered that many people who had discomfort when drinking ordinary cows’ milk had no side effects when they drank milk containing just the A2 protein type and no A1.
Because all cows originally produced only the A2 protein – the A1 protein emerged several thousands of years ago through modern farming practices – McLachlan set about developing a testing process to simply and safely identify cowsthat naturally produce milk with only the A2 type of beta casein protein and no A1and thus The a2 Milk Company was formed.
Today, its mission remains the same: “To pioneer the scientific understanding behind a2 Milk™ so we can bring more people the pleasure and nutritional goodness that only comes from real and natural milk.”
With regards to its farm suppliers, which include 25 in Australia, Khan says all of them only supply milk free of the A1 protein, and they follow unique quality systems and processes.
“Everyone who packs our products or anyone who touches our products follows ‘The a2 System’ as such,” he adds, “and it's our strong relationships with each of these partners that makes us a success.
“So worldwide, whoever we deal with at the farm level, or processing or supplying, we spend a lot of time and effort with them not only on the quality of the product but the A2-ness of the product, so ensuring that there's no A1 protein throughout the process.
“There are a number of testing regimes we've put in place at the farm level and processing level, before it hits any consumer.”
Although he reveals growing both infant and adult nutrition, in both product and choice, is a focus, Khan says the adult range is top secret.
“The growth of our business has been built on the strength of our IP, our unique and powerful brand proposition and the tangible consumer digestive benefit that consumers enjoy when they switch to our brands”.
Wise words, as the dairy giant has already had a few run-ins with its rivals. In 2016 The a2 Milk Company had beef with Japanese beverage company Lion Group, and sued Lion over its use of the term ‘A2 Protein’ on labelling for its PURA and Dairy Farmers products for misleading and deceptive conduct, demonstrating its commitment to protecting its powerful brand & IP. The case is scheduled to be heard in November 2017.
Khan says in the short term, the company’s focus is to continue investing in its unique brand proposition within its current markets, and also , explore the lucrative and growing adult nutrition market.
“Basically, we are continuing to ensure that we get the A2 protein proposition to as many people as possible, whilst ensuring that the business is still lucrative.”