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A2 says success in Australia is not replicated across the ditch.
THE A2 MILK Company (a2MC) believes a lot of its new a2Platinum infant formula could be finding its way from Australia into China on the ‘grey market’ – though regulation changes have hampered its launch of the product there.
Sales in Australia have exceeded projections since its launch in September 2013, the company says in its annual report. The Auckland company, which operates mainly in Australia, made sales of $106m in Australia in the last financial year and only $126,000 in New Zealand.
Sales of a2Platinum in New Zealand have been hampered by limited distribution, the annual report says.
“While sales are strong in the Australian domestic market, it is assumed a proportion is being purchased and subsequently shipping to consumers in China relying on an assurance of an Australian-sourced product. Whilst it is not possible to determine sales in this grey market, this further confirms our confidence in the China market opportunity.”
The a2Platinum launch into China was hampered firstly by its New Zealand manufacturer Synlait not initially gaining China registration under new rules; it now has registration after its canning plant opened. It is now also dealing with regulations on proving “close relationship” with a manufacturer. The company says it is confident of gaining necessary approvals and it plans a renewed marketing strategy in China early next year.
a2MC launched a2Platinum in Australia and New Zealand in September, 2013. Sales have grown well in Australia where it has a strong relationship with several supermarket groups and other outlets, a spokesman told Dairy News.
New Zealanders are much less aware of the a2 brand because of the low profile of a2 fresh. Dairy News understands the company is considering taking over distribution of a2 fresh milk in New Zealand when a licence agreement expires in 2017. Australia represented $106m of $110m sales worldwide with China sales at $2.7m and UK at $1.1m.
The company’s overall operating revenue for the year to June 30 was $111m, up 17% from the previous year. It says the net after tax profit of $10,000 was hit by the New Zealand dollar rising against the Australian dollar, reducing operating revenue by $14m over the previous year.
Plans for 2015 include an imminent launch of a2 Milk brand in Sainsbury’s and Wholefoods supermarkets in the UK and resumption of infant formula sales to China. It also plans a trial shipment of a2 UHT milk into China, and a launch of a2 Milk into the US West Coast in the second half of the financial year, costing $20m over three years, according to the annual plan.
ASX listing coming
The a2 Milk Company Ltd (a2MC) is applying to list on the Australian stock exchange ASX, likely in the first quarter of 2015. The company will stay listed on the NZX main board.
Managing director Geoffrey Babidge says, “With a significant part of our earnings and growth coming from Australia, seeking an ASX listing is a logical strategic move for the company.
“Listing on ASX will enable more Australian investors to participate in the company’s growth and will increase the attractiveness and liquidity of its shares. The board believes that this will benefit all shareholders.”
Babidge confirmed a2MC would not seek to raise any new capital in its ASX listing. a2MC has appointed Goldman Sachs New Zealand and DLA Piper Australia to advise on the ASX listing.
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