No squeeze on profits at dairy's success story

Not everyone has been a loser in the milk wars. A2 Corporation has sidestepped the industry carnage and doubled the market share of its milk, in dollar terms, across Australia's supermarkets over the past two years in the face of price cuts by all its major rivals.

Not everyone has been a loser in the milk wars. A2 Corporation has sidestepped the industry carnage and doubled the market share of its milk, in dollar terms, across Australia's supermarkets over the past two years in the face of price cuts by all its major rivals.

The A2 pitch is built on the A2 beta-casein protein which, it says, "may assist with your digestive well-being".

The protein is found in the milk of certain dairy cows. The A2 company started identifying these cows with genetic tests and milking them separately to offer consumers milk consisting of the A2 protein rather than A1.

The health claims around this protein have acted as the cornerstone of the milk's appeal and led to massive growth despite the product being priced at a significant premium to the competition.

"We would say A2 is the only brand that has genuinely differentiated positioning compared to other brands and private label," said the head of its Australian business, Peter Nathan.

The New Zealand company has grown so strongly it invested $15 million in a processing plant near Camden, south-west of Sydney, last year to meet growing demand for its dairy products.

"Milk brands that are communicating apparent health benefits, such as A2 — which have more than doubled value share in the past two years — show that shoppers will pay a premium when making product selections to suit their wants and desires," said Kosta Conomos, the head of Nielsen's retail industry group.

Mr Nathan said the company's fast growth had not been impeded by the significant marketing spend of the major milk vendors, which have gone permeate free.

"If that was the reason for our growth, that would have hit us very badly," Mr Nathan said. "Our growth has accelerated even during the time that brands have taken out permeate."

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles