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.

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."