Alternative milk company, a2 Milk (ASX:A2M), performed strongly during the quarter after posting an outstanding interim result, well ahead of both our and consensus analyst forecasts. The A2M share price also benefited from a perceived relaxation in the regulatory environment in the key Chinese market late in the quarter.
A2M’s products come from dairy cows that produce only the A2 type of beta-casein protein, whereas most dairy contains A1 and A2. As with several other companies offering infant formula and health foods, the ‘daigou’ traders - individuals and small businesses that buy product from retail shelves for re-sale in China - have played an important role in the growing success of A2M.
The brand continues to resonate strongly in the important Chinese market and much of the popularity to date has come from simple word of mouth. For instance, Chinese mothers in Australia communicating with family and friends back home. The company continues to make strong progress towards its objective of building a global brand based on the health and digestive benefits of nutritional products containing only the A2 protein.
As well as being highly profitable in Australia and New Zealand and growing rapidly in China, A2M is now profitable in the UK and is investing heavily in the US market, particularly in the fresh milk space, where it has secured important distribution agreements that are showing positive early signs. (VIEW LINK)