New Zealand firm A2 Corporation (A2C) has announced a strategic agreement whereby Synlait Milk will manufacture A2's branded nutritional powders on the firm's behalf as A2C aims at lucrative Chinese and Southeast Asian markets.
A2C said that Synlait Milk would source A2 Milk - which is A1 beta-casein free and is marketed on a 'digestive wellbeing' platform - from accredited Canterbury dairy farms, and manufacture trademarked A2 brand nutritional powders at Synlait's facility in Rakaia (New Zealand).
These include milk powders and infant formulas derived from A2 Milk, a natural, additive-free dairy milk from specially selected cows that only produce milk containing the A2 type of beta-casein protein.
Although A2 milk contains lactose, A2C believes that many people incorrectly believe they are lactose intolerant when they could instead be reacting to the impact of A1 beta-casein protein.
Asian strategic plan
With its supply source now secure, A2C said it would seek to progress discussions with potential partners to distribute and market a2 brand nutritional powders, the firm said in a statement.
“This agreement with a highly reputable supplier of nutritional powders is a key step in our strategic plan to launch a2 brand infant formula products into high growth Asian markets, in particular China”, A2C MD Geoffrey Babidge said.
A2C said it estimated that the retail markets for infant formula in China and South East Asia was worth $6bn (€4.6bn) and $3bn respectively, and said that the market in China alone was forecast to grow at an average rate of 12% per year over the next decade.
Discussing A2C's 2011 performance for the six months ending December 31, chairman Cliff Cook highlighted continued acceleration is Australia (+48.7% on H2 2010) with a2 brand fresh milk cornering 4.7% of branded fresh milk by value, compared with 3.5% in H2 2010.
A2C had a turnover of NZ $28.28m for the six month period (+48.7%) while EBITDA was NZ $2.271m compared with H2 2010 (NZ $1.579m).
Conquering the UK?
The firm opened a brand new milk processing facility in Sydney last month, and in A2C's half yearly report Cook said it continued to explore opportunities with New Zealand licensee to build a2 brand awareness and sales, adding that the settlement of a long-running dispute with a South Korean licensee would "enhance our reputation and prospects for growth in Asia and the strength of our intellectual property".
A2C is also pushing into the UK and Ireland after it inked a JV with Robert Wiseman Dairies last November, with the launch of an a2 branded fresh milk planned for September 2012, irrespective of German giant Muller's takeover of Wiseman.
"The UK fresh milk market is approximately 6.5 billion litres per annum, and the market opportunity for a2 brand fresh milk products has the potential to be threefold that of Australia," Cook said.
Although Synlait Milk is New Zealand-based, it is 51% owned by Shanghai-based Bright Dairy, China's third-largest dairy group.