The a2 Milk Company expands into South Korea

The a2 Milk Company has entered into an exclusive sales and distribution agreement with Yuhan Corporation (‘Yuhan’) to promote and distribute a2MC’s branded products in South Korea.

A formal ceremony in recognition of the new commercial relationship has been held in Seoul today hosted by Mr. Geoffrey Babidge, Managing Director & CEO of The a2 Milk Company and Lee Junghee CEO and President of Yuhan Corporation.

Yuhan is the leading pharmaceutical company in South Korea, with annual revenue in the order of USD1.4 billion. Yuhan also has capabilities in consumer goods and has established relationships with leading international companies including Kimberley-Clark and Clorox Corporation.

South Korea is an attractive market opportunity for a2MC’s products given high per capita dairy consumption, world-class retailers and a fast-growing e-Commerce channel.

“Yuhan Corporation is a long established, highly credentialed and principled Korean business. We share similar values and ambitions, and with our complimentary capabilities believe that together we can build a meaningful business in Korea,” said Geoffrey Babidge.

The a2 Milk Company product range will be sourced from Australia and New Zealand, with nutritional products produced by our key supply partner, Synlait Milk Limited. Initial sales are expected to commence during the second half of calendar year 2018.

Alongside the expansion into South Korea, a2MC is continuing to broaden its nutritional product portfolio. In addition to new a2 Platinum products recently announced, the company is to shortly introduce a unique and premium a2 Milk powder product blended with New Zealand sourced Mānuka honey.

A2 Milk strikes deal with Fonterra

The A2 Milk Company has entered comprehensive strategic relationship with dairy giant Fonterra encompassing a range of supply, distribution, sales and marketing arrangements in targeted markets.

This is a significant development for a2MC given the wide-ranging nature of the relationship. The arrangements expand a2MC’s ability to build its business in new priority markets and beyond, provide exciting growth initiatives in new A1 protein free products and enable consumers to obtain new and innovative milk products.

The initial scope of the relationship incorporates the following elements:

Nutritional Products Manufacturing and Supply Agreement (NPMSA)

 The companies have entered into an NPMSA under which Fonterra will exclusively supply A1 protein free milk products in both bulk powder form and consumer packaged form to a2MC.

Within this agreement, Fonterra has been granted exclusive supply rights for certain nutritional products destined for sale in certain a2MC new priority markets in South East Asia and the Middle East up to a specified volume. In return for these rights, a2MC has become a strategic customer of Fonterra with allocation of production capacity

as volume grows and competitive commercial terms. The products will be manufactured at Fonterra’s Darnum facility in Victoria, Australia, and packaged into consumer packaged form at Fonterra’s facility in Hamilton, New Zealand. To support the agreement, a new A1 protein free milk pool will be developed in Australia in conjunction with a2MC.

New Zealand Fresh Milk Licence

Fonterra has entered into an exclusive licensing agreement for the production, distribution, sale and marketing of a2 Milk branded fresh milk for end sale in the New Zealand market. As part of the New Zealand fresh milk licence, Fonterra will with support from a2MC, establish an A1 protein free milk pool in New Zealand.

a2MC will provide Fonterra with access to a2MC’s systems and know-how relating to the sourcing, processing and marketing of a2 Milk. Fonterra will leverage its substantial capabilities in the New Zealand milk market to establish distribution across the country.

Distribution and Sales Arrangements

As an extension of the NPMSA, the companies will seek to establish distribution and sales arrangements where Fonterra has resources and execution capability to assist a2MC’s market entry strategies in the new priority markets. The services may relate to any of importation, registration, warehousing and sales and distribution.

Exclusive period to explore a2MC branded butter and cheese, and China sourced liquid milk

This includes evaluating and, if appropriate, negotiating commercial arrangements for the sale of certain new a2MC branded A1 protein free products in Australia, New Zealand and China. These arrangements relate to traditional dairy products not presently marketed by a2MC, including butter and cheese, as opposed to nutritional products, and would be complementary to Fonterra’s dairy products portfolio in the specified markets.

Packaging facility to be explored

Given a2MC is now considering investment in blending and canning capabilities, a2MC and Fonterra have also agreed to explore the potential establishment of a jointly-owned facility as an extension of the arrangements under the NPMSA and to cater for growth.

Development of A1 protein free milk pool

To support these agreements, Fonterra in conjunction with a2MC will progressively develop an A1 protein free milk pool in New Zealand and Australia. This is for the purposes of manufacturing and supplying products to a2MC under these strategic arrangements. It is intended that these milk pools will significantly grow over time to service the agreement.

 

Chinese demand sees A2 Milk nearly triple profit

The A2 Milk Company’s full-year net profit has risen by 198 per cent to $NZ90.6m ($A83.4m), boosted by increased sales of infant formula mainly in China.

Infant formula generated 72 per cent of the company’s total revenue for the year – up from 61 per cent in the 2016 financial year.

The company is clearly focused on sustainable growth of a2 Platinum infant formula through significant investment in product supply and quality, building brand awareness and strength, and meeting the requirements of China’s regulatory regime.

In Australia, a2 Milk branded fresh milk achieved further growth in sales, while a2 Milk branded whole milk powder, introduced in the previous year, showed strong growth.

Continuing earnings momentum has led to a further strong increase in the cash position. Net operating cash flow for the year was $99.9 million, compared with $21.5 million in the pcp and in particular benefited from lower than targeted infant formula inventory due to strong demand.

The closing cash on hand of $121.0 million was after an investment of $48.7 million in shares in Synlait Milk Limited.

“The Company’s continued growth reflects increasing consumer acceptance of the a2 brand and the benefits of dairy-based products free from the A1 beta casein protein type,” Managing Director Geoffrey Babidge said in a statement.

“We have continued to support and expand our brand proposition through effective marketing and promotional activities in each of our markets. Our support for relevant scientific research and continued investment in intellectual property are also key aspects of this strategy.

 

A2 Milk ups revenue guidance again

The a2 Milk Company has increased its full year revenue guidance for the second time in two months, in response to continued strong demand for its a2 Platinum infant formula in China.

The company said in a statement group revenue is now forecast to be approximately NZ$545 million ($A518 million) for the 2017 financial year, an increase of approximately NZ$20 million on the previous update.

In addition, the company said it had been working closely with its infant formula manufacturing partner, Synlait Milk, to uplift the production schedule for the remainder of the year.

As part of the commentary given at the time of release of the company’s first half results on 15 February 2017, the company advised that its investment in marketing would likely be higher in the second half by up to NZ$15 million, based on the planned phasing of communication and development activities across the year.

Due to changes in the phasing of the marketing investment, primarily in China, marketing expenditure in the second half is now expected to be approximately NZ$10 million higher than the first half of the 2017 financial year.

A2 Milk forecasts sales jump

NZ milk company A2 Milk is forecasting higher than previously expected sales in the six months to June, as a result of increased demand.

The company said in a statement demand has been particularly strong in Australia, but also through the cross border e-commerce (CBEC) channel into China.

“The Company confirms that for the 9 months ended 31 March 2017, Group revenue was NZ$388.5m ($358m),” the statement read.

The company said that, in response to increased demand, it will increase its production for the remainder of the year.

“On the assumption of continuing strong demand for a2 Platinum infant formula and production deliveries being achieved consistent with the revised production schedule, the Company is now expecting infant formula sales for second half FY17 to exceed sales achieved in first half FY17,” the statement said.

“As a result, Group revenue for the 2017 financial year is forecast to be approximately NZ$525m ($483.8m).”

A2 Milk Company profit goes through the roof

Infant formula maker A2 Milk has reported first half net profit after tax of $NZ39.4 million ($36.8 million), a 290 per cent increase over the previous corresponding period.

The company said in a statement the result was higher even than profit for the full 2016 financial year.

The result reflects strong demand for the company’s infant formula, both in Australia/new Zealand and China. Revenues increased by 62 per cent and 348 per cent in Australia and China respectively, and Operating EBITDA by 104 per cent and 1,021 per cent respectively.

“The half-year results show continued progress against the Company’s objective of building a global brand based on the health and digestive benefits of nutritional products containing only the A2 beta casein protein – free of the A1 protein,” said Managing Director Geoffrey Babidge.

“This has involved continuing to grow the established positions in fresh milk and infant formula in Australia while also investing in the key international growth initiatives in China, the United States and the United Kingdom.”

A2 markets its products around the fact that they contain only the a2 beta casein protein and the a1 protein.

The result contrasts with the performance of competitor Bellamy’s which has seen lower sales in China and falling profit.

Science or Snake Oil: is A2 milk better for you than regular cow’s milk?

The new big thing hitting our supermarket shelves is “A2 milk”. Not only has this resulted in a great debate about whether it is any better for us than regular cow’s milk, but also a bitter feud over labelling between the big dairy companies in the Federal Court.

So what is A2?

Cow’s milk contains protein. The primary group of milk proteins are the caseins. A1 and A2 are the two primary types of beta-casein (beta-casein is one of the three major casein proteins) present in milk. They are simply genetic variants of one another that differ in structure by one amino acid.

The A1 protein produces beta-casomorphin-7 (BCM-7), which has been shown to alter gastrointestinal function (slowing down bowel movements from stomach to anus) and increase inflammation in the gut in animal studies.

Commonly, both A1 and A2 types of casein are expressed in cow’s milk in Europe, America, Australian and New Zealand, and hence the milk we find on our supermarket shelves.

The hype surrounding A2 milk came about after the patenting of a genetic test by the a2 Milk Company. The patent allows the company to determine what type of protein a cow produces in its milk and therefore license dairy farmers that prove their cows express only A2 protein in their milk (and not A1 protein). A2 milk is marketed by the a2 Milk Company to contain only the A2 type of beta-casein.

Initially, there were marketing claims that A1 proteins were harmful to our health, but a full review of the literature by the European Food Safety Authority (EFSA) in 2009 nullified such claims. Insufficient evidence exists to suggest A1 proteins have a negative effect on our health. The EFSA found no relationship between drinking milk with the A1 protein and non-communicable diseases such as type 1 diabetes, heart disease and autism, which is the focus of much of the hype.

After these findings were released to the public, the marketing focus shifted towards the A1 protein causing digestive discomfort and symptoms usually associated with lactose intolerance (for example, bloating and flatulance).

The first peer-reviewed human study was conducted with a small number of people (41). Only ten of the participants reported an intolerance to commercial cow’s milk. They compared differences after drinking milk containing only the A1 protein versus milk containing only the A2 protein (the milk on our supermarket shelves is usually a combination of the A1 and A2 milk proteins).

Interestingly, they found after drinking the milk containing A1 protein only, participants reported softer stools than when drinking the A2 milk. These results tend to go against the evidence in animal studies that the A1 protein slows down the movement of contents through the gastrointestinal system, which could be thought to bulk up stool content and hence result in harder stools.

The authors of this study suggested the softer stools might have been caused by an increase in gut inflammation caused by consumption of the A1 protein. Gut inflammation can cause malabsorption of fluids and nutrients and hence softer stools. However, the study found no difference in calprotectin (a measure of inflammation) between the two milk groups, so it failed to draw any sound conclusions.

This led to the second study conducted in humans, which was published this year. Unlike the previous study, it did use common commercial milk that contains both the A1 and A2 milk proteins and compared this to consuming milk containing only the A2 protein. It included only people (45 subjects) who self-reported an intolerance to cow’s milk.

Of the 45 subjects, 23 were diagnosed as lactose-intolerant. Someone who is intolerant to cow’s milk has an inability to digest lactose due to a deficiency in the lactase enzyme. But it is important to note lactose is present in both A1 milk and A2 milk.

The results showed A2 milk did not cause an increase in unpleasant digestive symptoms (for example, bloating and flatulence) usually associated with milk consumption in those who are lactose-intolerant. When cow’s milk containing both the A1 and A2 proteins was provided, there was an exacerbation of stomach upset. However, this would be expected for someone who is sensitive to dairy products, or lactose-intolerant.

The changes in inflammatory markers observed in this study need to be interpreted carefully. Despite some statistically significant changes between the two milk groups being noted, these aren’t necessarily clinically relevant and therefore do need further investigation in a much larger study with a greater sample size.

So is A2 worth it?

For those who do not experience any problems with milk consumption, there is no evidence to suggest any benefit in having A2 milk over the common consumed commercial milk, which contains both the A1 and A2 proteins. For less than half the price per litre, the latter would be the favoured option.

For those who self-report an intolerance to milk or are lactose-intolerant, A2 milk may be a suitable selection to prevent commonly reported stomach upset complaints, but so too is lactose-free milk. Lactose-free milk does not contain lactose, which is the naturally occurring sugar that causes the gastrointestinal problems in the lactose-intolerant. Consequently, what is needed is a study comparing the effects of lactose-free milk versus A2 milk in those who are lactose-intolerant.

Most importantly, longer-term studies with larger sample sizes are needed, as both of the studies conducted in humans to date have been conducted with small numbers over short durations.

The most important thing is that we don’t exclude milk products from the diet, as dairy is a rich source of calcium that is readily bio-available (meaning we can absorb the majority of it from this food source). Calcium is essential for the prevention of osteoporosis (brittle or weak bones) and an adult should aim for three dairy serves per day.

The Conversation

Nicholas Fuller, Research Fellow, Clinical Trials Development & Analysis, University of Sydney

This article was originally published on The Conversation. Read the original article.

a2 Milk profit skyrockets with infant formula demand

a2 Milk's half year profit has risen dramatically to $NZ10.1 million ($A9.34 million), on the back of demand for its infant formula.

The record half-year profit for the six months to December 31 compares to the profit of $NZ125,000 for the previous corresponding period.

In addition, the company’s total revenue rose to $NZ139.1 million, an increase of 86 per cent compared the previous corresponding period.

Revenue from sales of a2 Platinum infant formula across Australia, New Zealand and China were $73.9 million, an increase of 340% on the previous period. This compares with previously advised sales for the four months to 31 October 2015 of $38.0 million.

The company said it now expected full-year operating profit to be in the range of $45m to $49m, with revenue of $335m to $350m.

“The Company’s strategic agenda has been focused on growing and broadening the ANZ milk business and developing growth opportunities in select international markets,” commented a2 Managing Director Geoffrey Babidge.

“Following a period of development, a2 Platinum infant formula has become a significant contributor to growth and earnings in ANZ and China, which we see continuing. In addition, we see positive prospects for growth of a2 Milk whole milk powder, which was first launched late last financial year.

“We are pleased with the growing level of distribution for a2 Milk in the state of California and the repositioning of our brand in the UK during the period.”

 

Fonterra tops the list of IBISWorld’s Top 100 food and beverage companies

Fonterra has remained to be on the top of the IBIS list of food and beverage companies by revenue generated.

The largest 100 food and beverage companies in Australia generate in excess of $100 billion in revenue (up from over $96 billion in 2014-15) and employ more than 130,000 Australians. 

Strong growth in food processing industries, in addition to milk production in Australia benefitting from joint ventures and expansion of airfreighted fresh milk exports to growing Asian markets has pushed Fonterra into the #1 spot for over two years.

According to IBISWorld senior industry analyst Spencer Little, industry revenue is set to decline in the beer industry as alcohol consumption continues to fall.

"The two newcomers to the list are Green's Foods and a2 Milk. a2 Milk posted revenue growth of 40.2 per cent over the year through June 2015, on the back of fresh milk exports to China and substantial sales growth in a2 Platinum Infant Formula across Australia and New Zealand," Mr Little said.

"After purchasing the remaining 50 per cent interest in the a2 Milk Company Limited joint venture and converting it to a fully owned subsidiary, a2 Milk began exporting fresh milk to China in August 2014. Sales of the company's infant formula skyrocketed in 2014-15."

Top Ten Food and Beverage Companies revealed by IBISWorld

  1. Fonterra Co-Op Group
  2. Lion Nathan National Foods
  3. Coca-Cola Amatil
  4. JBS Australia
  5. Devondale Murray Goulburn
  6. Teys Australia
  7. Bidvest
  8. Inghams
  9. Food Investments
  10. Nestle