Hey
@lmonis, your link did not work so I cut and pasted the article once I looked it up. Good find.
Found it interesting from May last year A2m and BLK on the performance graph were nearly a mirror image of each other until October 2018. At that time BLK leveled off and then fell of a cliff sometime in Jan this year. A2M on the other hand has been beautifully tracking up steadily from October till Jan 2019 which at that time its performance shot up dramatically.
If this is a harbinger of whats to come our next report later on this year will likely well and truly surpass this weeks announcement. I think we now know why Jayne could not stop smiling when questioned if she was concerned about the future growth of the company when some in the media bought up the old chestnuts of China retaliation and Huawai. Its not mentioned much but I doesn't anyone think why A2M have been unaffected to the headwinds that have affected other companies doing business with China and the fact that a Chinese state owned entity (Bright Dairy) has a major stake in Synlat. Is it just coincidence or luck we have had our Chinese accreditation for so long while others have been waiting a eternity to hear if they have been successful in their applications.
Would the Chinese government dare to hold up A2 IF in the docks and therefore hurt themselves in the process with their stake in Bright Dairy ??? This ownership structure gives us protection from becoming scapegoat and pawn in retaliatory moves that have affected other AUS and NZ interests that sell into China in my opinion.
The a2 Milk Company v Blackmores: A tale of two companies in China
By
Carrie LaFrenz
Updated Feb 22, 2019 — 5.19pm, first published at 4.45pm
It's been a tale of two halves for Australian companies seeking success in China.
The a2 Milk Company this week showed the power of its brand among Chinese mothers purchasing its a2 Platinum baby formula, while vitamins maker Blackmores has stumbled due to slowing sales to the continent.
Determining the health of the world's second-largest economy is a challenge. In early February Beijing said
consumption growth will likely slow further this year. Retail sales growth during the Lunar New Year holidays
slipped to its lowest since at least 2011, and the government is pushing people to shop domestically to boost consumption, rather than spend abroad.
Jayne Hrdlicka, chief executive of The a2 Milk Company, says she has "an ultra-premium product, in a category that is premiumising". BRENDON O'HAGAN
However, it is not all doom and gloom. Appetite for consumption among China's richest remains robust, with strong growth in purchasing power among the younger generations.
That plays into the hands of a2 Milk, a brand that chief executive Jayne Hrdlicka says is "an ultra-premium product, in a category that is premiumising" and so is attractive to consumers.
Related Quotes
BKLBlackmores
$94.50+1.88 (+2.03%)
TWETreasury Wine Estates
$14.93+0.11 (+0.7
The market value of
a2 Milk pushed through $10 billion on Wednesday, when it gained $955 million in response to strong growth in China. It was a different story for
Blackmores the day before, as investors wiped $531 million from its valuation. It was left worth $1.6 billion after the stock crashed by 25 per cent on a profit warning prompted by the China business.
So why such a large difference in outcomes among two consumer goods players that have both gained on Chinese demand for Australian grown and made products?
Morgans analyst Belinda Moore covers both stocks. She says a2 Milk is not seeing China headwinds from a reportedly soft consumer or declining birth rates that its peers have experienced. Its infant formula products delivered strong growth, which looks assured over the medium-term as consumers continue to see it as a more premium option than others in the category.
Giving ground
Blackmores, on the other hand, is giving ground to competitors. "We note competitors are reporting strong growth and the CBEC [cross-border e-commerce] vitamin category is still posting growth implying Blackmores is losing share," Moore says.
One reason may be that it has under-spent on marketing and is now catching up. In contrast a2 Milk expects to double its marketing spend this half, taking its marketing spend for the year to an estimated $NZ136 million ($130 million) – or about 10.5 per cent of Moore's revenue forecast. Having a point of difference and a strong brand is essential for success in China, as Penfolds owner
Treasury Wine Estates can attest.
Both Blackmores and a2 Milk have been popular among the so-called daigous, Chinese tourists in Australia who fill their suitcases with product to sell on the internet once they get home.
However, both companies have also worked hard to find a direct route to the Chinese consumer as well. Blackmores is now selling its products via the Alibaba platform, and cutting out smaller daigou operators.
A2 Milk, on the other hand, has made great strides getting its tins of formula stocked on the shelves of 12,250 Mother and Baby Stores in China, up from 6700 a year ago. China label revenue was up 83 per cent in the first half of 2019 through the MBS network.
Hrdlicka says the multi-channel strategy remains important to its success in China.
"Through the eyes of the consumer each channel plays an important role and the combined effect is beneficial," she says. "Progress made during the period by the company in each channel has been significant."
Focusing on consumer
Modern supermarkets and Chinese label e-commerce retail channels are lesser contributors to sales for a2 Milk, but also play important roles.
"Our consumers are typically deeply loyal with high trust for the brand, yet there is significant scope to build our in-market brand awareness," Hrdlicka says.
But the guiding principle remains focusing on the consumer and connecting with them in a special way.
"The a2 Milk brand has a lot that sits behind it. It's not just the a1-protein free component," Hrdlicka says of a2's selling point that apparently makes the milk easier to digest.
"The consequence is that it's proven to be quite difficult for competitors to step into a1-protein free product and have the same success. What we are proving is we are less of a category and more of a brand."
Not everyone is as positive about the future for a2 Milk with UBS analysts noting the company's momentum, but flagging risks like the reliance on the single a2 Platinum brand.
(20min delay)
