Recently, New Zealand dairy company a2 Milk Company released its semi-annual report for fiscal year 2024 (the six months ending December 31, 2023).

The financial report shows that despite the shrinkage of China’s baby formula sales during the reporting period, a2’s Greater China revenue still bucked the trend and achieved double-digit growth, driving a2’s overall baby formula sales growth.

“We will continue to execute our growth strategy, mainly focusing on the China market. Currently, the China market accounts for about 80% of our brand sales.” David Bortolussi, the GM& CEO of a2 Milk Company, said.

Based on the performance in the first half of the fiscal year and the potential of the Chinese market, a2 Milk Company announced an increase in its revenue growth expectations for the full fiscal year.

01 Performance

The financial report shows that a2 Milk Company achieved revenue of NZ$549.5 million in China and other Asian regions, bucking the trend and growing by 16.5%;

In the first half of the fiscal year, a2’s profit before interest, taxes, depreciation and amortization in China and other Asian regions was NZ$135.9 million, an increase of 21.9%. Among them, the sales of the winning baby formula milk powder increased by 10.4% to 299 million New Zealand dollars, and the British standard baby formula milk powder increased by 19.9% to 210.5 million New Zealand dollars.

Judging from the specific results, a2 Milk Company’s sales of the baby products that won the bid increased significantly by 50.7%. a2 Company’s share of China’s baby accessories market has also increased from 4.9% to 6.4%. Kantar Worldpanel data shows that a2 Milk Company has successfully entered the top five in China’s baby formula market.

02 New Year Layout Plan

In order to achieve target goal, David Bortolussi, general manager and CEO of a2 Milk Company showed that although the overall baby milk powder market has shrunk, sales of a2 Milk Company’s winning baby formula milk powder have still achieved substantial growth. In the next step, a2 Milk Company will continue to implement its growth strategy, focus on investment and layout in China.

David Bortolussi also mentioned that, expect baby formula products, a2 Milk Company is also investing in other nutritional products for children, adults and the elderly to seek growth in new markets.

Moreover, David Bortolussi said that a2 Milk Company expects to launch more new products later this year.

03 CBME Insights

At the end of 2023, CBME Insights had an in-depth conversation with Yi  Yuan, Vice President of Sales of Greater China of a2 Milk Company. According to Yi  Yuan’s conclusion , the reasons why a2 can grow against the trend can be divided into two aspects:

First, respect and regard channels and dealers as important partners;

Second, focus on A2 and build differentiation barriers through concentration.

Regarding the former, Yi  Yuan told us that dealers are an irreplaceable role in the a2 business model and will not be subverted. “Because the relationship between a2 and its dealers is not simply a relationship between Party A and Party B, but a collaborator to open up the market together.”

Compared with some leading maternity and baby brands, which have tens of thousands marketing teams, the scale of a2’s marketing team is not large. For a2, dealers are actually the a2 marketing team.

In order to ensure the stability and efficiency of this cooperative relationship, a2 has also implemented two mechanisms: first, a2 hopes that dealers can focus more on the a2 brand in the milk powder category; second, a2 has an internal “inspection team” “Squad”, whose job responsibility is to inspect illegal goods and breach of contract.

Regarding the focus on A2, Yi Yuan told us, “Compared with other brands, the product line of a2 is more focused and focused. It is precisely because of the sufficient focus and concentration on this explosive product that it has no problem in terms of market management, protection, Whether it is to build consumers’ minds, we have an all-in attitude.”