The A2 Milk Company
I am happy with my allocation of The A2 Milk Company. When I was growing up, my dad was the milk man! We had copious amounts of milk, ice-cream and cheese in our house at all times. Although no-one in my family has a problem with digestion of any dairy products, this is a very interesting company to research. The A2 Milk Company’s entire business is built on the assertion that milk and dairy products containing only A2 milk proteins (as opposed to any A1 proteins) may not cause inflammation or cause digestive trouble compared with normal dairy milk available (which contains A1 and A2 proteins).
The company was founded in New Zealand in the year 2000 by Dr Corran McLachlan(scientist) after he discovered that some people who normally had discomfort when drinking ordinary cows milk, (containing both A1 and A2 proteins), were able to drink cows milk containing only the A2 protein and not experience discomfort. The A2 Milk Company has invented a patented non invasive dna test to determine which cows will produce milk containing only A2 proteins. The A2 Milk Company works with their suppliers to determine which cows only produce the A2 protein their milk. These cows are separated from the herd and milked separately to ensure that the A2 milk will not be contaminated by milk containing A1 proteins.
“as the a2 protein pioneers, we are single-mindedly determined to help people enjoy a better life”
The A2 Milk Company Annual Report 2016, p.2
The A2 Milk Company website is: www.thea2milkcompany.com
Here are three informative videos available on The A2 Milk Company website and youtube that explain these themes a little better:
What is A2 Milk?
The science behind A2 Milk
The A2 Milk Company – Investor Relations, prepared for the 2016 Annual Meeting:
The business describes themselves as “in the business of producing, marketing and selling premium branded dairy nutritional products in targeted global markets”. 2016 Annual Meeting Presentation
They produce liquid milk products and infant nutrition formula and a few others (Ice cream was released to Australian retailers in 2015) and aim to develop into other dairy based nutritional products. The A2 Milk products are available in Australia, New Zealand, UK, China and the US (Southern California, Northern California, Pacific North West and Colorado). As part of my research into The A2 Milk Company, I have product tested both the light and whole versions of the A2 Milk available at my local supermarket. As yet, I haven’t seen the infant formula (a2 Platinum Premium Infant Formula) stocked at the supermarket yet. I also don’t have an Infant, so product testing would be futile for me in this area.
The A2 Milk Company is listed on both the New Zealand Securities Exchange (NZX), ticker code: ATM; and the Australian Securities Exchange (ASX), ticker code: A2M. The financial year for the company is 30 June.
The Company Strategy as outlined in the 2016 Annual Report is as follows:
- Continue to build a substantial premium milk business;
- Build a global infant nutrition business;
- Establish an advanced adult nutrition brand;
- Continue to invest in building brands, integrated Intellectual Property portfolio and sponsoring a growing body of scientific evidence surrounding the A2 protein benefits (in the absence of A1 protein).
The areas of business that seem most important or critical to The A2 Milk Company this financial year include:
- Financially supporting researching to support the claim that milk and dairy products containing the A2 proteins (in absence of A1 proteins) cause less inflammation and digestive issues for some people that suffer these ailments.
- The transition of the business from a dairy company to a new strategic direction on dairy based nutritional products.
- Increasing their market share in the AUS, UK, US and Chinese markets
- The Chinese Market seems to be the number one target market for the company for the next financial year, particularly the increase of sales of infant formula.
- A2 Platinum Infant Formula was the fastest growing infant formula in the Australian Market in 2016
Key Challenges facing the A2 Milk Company?
- The Australian arm of the business initiated Federal Court proceedings against a competitor (Lion Group; subsidiaries Dairy Farmers and Puma Milk brands) for alleged misleading and deceptive conduct around the competitors “Contains A2 Protein” product claim. I.E. Dairy Farmers and Puma Fresh milk brands have been advertising “Contains A2 Protein: on their product. This is true, but ordinary cows milk sold by these two businesses will also contain the A1 proteins that The A2 Milk Company has removed from their products. Market research and feedback has concluded that it confuses the customers. This case will be heard in November 2017.
- Changing regulatory requirements in the Chinese Market for importation and supply of infant formula
My Key Concepts and Questions:
- Is the science behind the A2 Milk Company a proven fact or is it just really good marketing? It seems that many of the experiments carried out that purport the evidence behind A2 Milk Companies claims are funded by the company? I guess we will find out in the future…
- The Annual Report can be a hard slog to read, and to be honest I probably need to go over it again a few times to really gain a thorough understanding of what is going on in the business
- I also had to really read Chapter 3 of our Study Guide to identify my Financial Reports. In The A2 Milk Company Annual Report the Income Statement is called the Consolidated Statement of Comprehensive Income and the Balance Sheet is called the Consolidated Statement of Financial Position. The Statement of Cash flow and Statement of Changes of Equity were easier to identify, being the Consoldiated Statement of Cash Flow and Consolidated Statement of Changes in Equity.
There are various news articles, youtube clips and Facebook comments discussing The A2 Milk Company. Here are a few links:
Overview of the A2 Milk Company, published 24 Nov 16 for the 2016 Annual Meeting:
Sky News 24 August 2016, Published on Oct 11, 2016
Peter Nathan, CEO of The a2 Milk Company Australia and New Zealand explains the highlights of the 2015-2016 annual results
Legal battle between a2 milk and Dairy Farmers’ Lion turns to science. September 16 2016