In the context of the declining birth rate and the self-strengthening of domestic products, the latest 2022 interim financial report released by Australian dairy company a2 Milk released a signal of strong growth. Inventory management, acquisition of local enterprises, and increased investment have become important means for A2 Milk Company to boost its performance. A2 Milk said, "It expects strong growth in the second half of the fiscal year and increased expectations, and continues to increase investment in the Chinese market." In the eyes of industry insiders, brand status, brand image and differentiated products are the competitive underpinnings of A2 Milk Company, and integration into localization is the correct strategy to seize the core market.
Inventory management should put pressure on performance
On February 22, A2 Milk released its fiscal 2022 interim financial results. According to the financial report, in the first six months ended December 2021, A2 Milk's operating income was NZ$661 million, an increase of 24.8% from the second half of 2021, in line with previous expectations.
A2 Milk believes that the short-term revenue performance of A2 Milk Company has passed, and it is expected to show strong growth and raise expectations in the second half of the fiscal year. David Bortolussi, General Manager and Chief Executive Officer of a2 Milk, said, "Our results in the first half of our fiscal year were in line with expectations, putting the company in a strong position to continue to implement the strategy and achieve revenue growth in fiscal year 2022. ”
a2 In the growth strategy announced by the milk company, inventory management has become an effective focus to boost its performance. Previously, a2 Milk Company took the initiative to take inventory management measures in the first quarter of fiscal 2022, limiting shipments to distributors to improve channel inventory levels and enhance sales.
a2 After the implementation of the milk company's inventory management initiative, it has produced positive results, and channel inventory has fallen to the target level. Product sales in mother and baby stores and online channels showed double-digit growth in the second quarter of fiscal 2022. Data released by Nielsen shows that "a2 to initial" retail sales of mother and baby stores increased by 11% compared with the same period. According to Smart Path, retail sales from online channels grew 17 percent in the first half of fiscal year.
In response, David Bortolussi said, "The actions we took last year to address the excess inventory of infant formula proved to be effective, and we are seeing significant improvements in channel inventory levels, market pricing and product freshness of our products." ”
Zhu Danpeng, an analyst in the Chinese food industry, told Consumer Titanium, "In the context of the decline in the birth rate, various milk powder companies have encountered unprecedented challenges, but after the A2 milk company implemented the inventory management strategy, the a2 milk company has entered a virtuous circle node." ”
Dairy analyst Song Liang also believes that inventory management has brought a lot of help to the performance of a2 milk companies. He told Consumer Titanium, "In 2021, A2 Milk Company recycled market inventory through cash, although it temporarily caused a short-term decline in revenue and profit of A2 Company, but stabilized channel confidence." ”
A2 Milk released its 2022 interim financial report showing that the number of A2 Milk distribution stores increased from 228,000 at the end of June 2021 to 246,000.
The advantage comes from differentiated products
In the latest financial report, "product a2 to the initial ® market share hit a record high" became a major highlight in the performance. According to the financial report, a2 is one of the few international brands to ® gain market share. From October to December 2021, a2-1 ®%'s market share increased to 3.1%, and reached a record high of 3.2% in December.
For the reasons for the increase in market share, Zhu Danpeng believes that A2 containing "a2 type protein" is a differentiated product in ® the domestic milk powder market and a product advantage of A2 milk company.
According to ® the official website of a2 milk company, a2 is the original imported milk powder in New Zealand, containing "type a2 protein". "Type a2 protein" is more precious and naturally affinity than the "type a1 protein" in ordinary milk.
Since its inception, a2 has ® maintained a high growth rate in the Chinese market with "a2 protein" as the selling point. a2 Dairy Milk's FY2021 financial report data shows that a2 to early ® infant nutrition product revenue was NZ$389.9 million, an increase of 15.4% year-on-year.
A2 Dairy Disclosed in its financial report for fiscal 2021 that according to Nielsen's data, the number of active outlets for offline distribution from a2 to the beginning ® increased from 18,200 at the end of June 2020 to 22,800 The rolling market value share of the 12-month mother and baby store channel increased from 2.0% at the end of June 2020 to 2.5%.
Song Liang said, "In addition to inventory management, the reason for the growth of a2 milk company is that a2 milk company is strengthening the popularity and education of 'a2 protein' on the one hand, laying the foundation for its brand shaping; at the same time accelerating the layout and expansion of the third and fourth-tier markets, laying a solid foundation for the growth of a2 milk company's offline business." ”
But at the same time, Song Liang believes that A2 milk companies will face more and more large enterprises entering the "A2 type protein", and the homogenization of the milk powder industry is becoming more and more serious. "It is recommended that A2 Milk Company establish its own 'A2 protein' product standards, and make obvious distinctions and divisions with other companies."
Therefore, for the AR system, we feel that it is a suggestion, that is, to establish the standard of AR products of their own enterprises, so that they can make an obvious distinction and division with other enterprises.
In addition, a2 Milk said in its mid-fiscal 2022 financial report that in China's record market share, the growth rate of new consumer concentration 1 and 2 segment products and 4 segment products that penetrate the children's market is significantly higher. The industry believes that such a market share growth structure guarantees the potential for sustained growth.
It is worth mentioning that according to the latest brand health indicators tracked by A2 Milk, the brand health of A2 Milk Company remains strong, and the brand recognition, trial rate, reuse and other indicators of Chinese label products have reached a new high.
We will increase investment in the Chinese market
The good news of the performance improvement was accompanied by the increase in a2 milk company's growth expectations for fiscal 2022. a2 Milk said its revenue outlook for the second half of 2022 is expected to be significantly higher than in the second half of fiscal year 21. Due to the growth of winning bids and British standard infant nutrition products, strong growth is expected in the second half of 2022 and the full year of fiscal 2022, exceeding initial expectations.
At the same time, in addition to the record share of a2 to the initial ® market, a2 milk sales of a2 liquid milk in China and other Asian markets increased by 50.3%, and the revenue of other nutraceuticals increased by 69.2%, and related products had more growth opportunities, including UHT products launched in China.
The good sales momentum of a2 milk company's products in the Chinese market has further enhanced a2 milk company's confidence in the Chinese market. A2 Milk Company's fiscal 2022 interim financial report shows that in the second quarter of fiscal 2022, A2 Milk Company's revenue in China accelerated.
Through the acquisition of domestic dairy companies, it reveals the determination of a2 milk company to deepen localization. A2 Milk Company's mid-fiscal 2022 financial report shows that A2 Milk Company is optimistic about the prospects of the A2 dairy market, and has reached a strategic cooperation with China's central enterprise Zhongmu Group to invest in the upstream production capacity of New Zealand Mataura Dairy against the market to expand the product field and continue the whole milk strategy.
On August 4, 2021, a2 Milk Company's acquisition of a 75% stake in Mataura Dairy was officially completed. The industry believes that this transaction can deepen the further cooperation between A2 Milk Company and domestic enterprises, form a synergy of superior resources, and help A2 Milk Company fully integrate into the Chinese domestic market.
It is worth mentioning that after the acquisition of Mataura Dairy, a2 Milk's balance sheet remained strong, with net cash at the end of the period of NZ$667.2 million.
Zhu Danpeng said, "China as the core market of A2 milk company in the world, by the A2 milk company's extreme attention and attention, on the whole, the future development trend of the industry is 'stronger, weaker', so a2 milk company to increase investment in the core market and attention is right, after a series of adjustments, the overall development of the future a2 milk company is still quite optimistic." ”
A2 Milk Company said that in the current declining birth rate and the decline in the total amount of milk powder industry, A2 Milk Company and partners are working together and are ready for recovery.