ATM - A2 Milk Corporation Limited

[Tsuba]

If you look at the last 6 weeks graph, it is starting to look good, just a couple of big sellers to go.

I will have a milkshake with you. God it is getting boring over at the PEB Cafe.

[see weed]

Quiet day today , time to go and weed some more garden. Enjoy your a2 milk shake. Thats given me an idea. Someone should start an a2 milk shake bar.

[iceman]

W69, I think this is a really interesting and fundamental question. I have been thinking about it in relation to the UK. In northern Europe, you have countries with herds that are largely A2. These countries are geographically very close to the UK and within the European Economic Area (not all in the EU). Who says the A2 milk sold in the UK needs to be produced in the UK ? Maybe conversion costs and issues are not as cumbersome as we tend to think.

Excuse my ignorance.

How do ATM get the milk onto the supermarket shelves in Australia, physically that is.

They have farmers with a2 herds .....they say they have a network of independent processors (dairy factories?) who process the milk ......freight seems to be a big expense. That's about all I know

Do they pay these independent processors a set rate to process the milk and package the end product?

Does A2 have its own distribution centre / warehouses or do they utilise the infrastructure of the independent processors to get the product to the likes of Coles?

From a value chain perspective I assume that what A2 Corp makes is what they sell it to Coles et al less want they pay the farmer for the raw milk less the independent processing cost less all distribution and delivery costs? Sales and marketing on top that.

Just trying to fine tune my financial model

[NT001]

Someone should start an a2 milk shake bar.

Not sure how commercially successful that would be. A better approach, I think, would be to persuade milk shake bar operators who are already doing well to offer "ordinary" milk shakes at normal price and a2 milk shakes at a premium price - they would have to be at a significant premium to cover costs. That would get people asking "what's with this a2?". You could then hand out your info material explaining the health benefits of a2 and where it can be bought in your area.

[NT001]

W69, I think this is a really interesting and fundamental question. I have been thinking about it in relation to the UK. In northern Europe, you have countries with herds that are largely A2. These countries are geographically very close to the UK and within the European Economic Area (not all in the EU). Who says the A2 milk sold in the UK needs to be produced in the UK ?

a2MC UK already has farms in Wales and western England supplying a2 milk and I don't think supply is a problem. Remember, it's a niche product, not requiring massive quantities. And transport across the water would add big costs. The question will become more interesting when a2MC moves into the US. It's starting its sales in California, better known for i8ts wine than its dairying, and my guess would be that milk may be brought in from the midwest (eg Nebraska) which is cow country two states away. There are already a2-only farms there, and in the US it's nothing to cart milk thousands of km.

[Harrie]

W69, I think this is a really interesting and fundamental question. I have been thinking about it in relation to the UK. In northern Europe, you have countries with herds that are largely A2. These countries are geographically very close to the UK and within the European Economic Area (not all in the EU). Who says the A2 milk sold in the UK needs to be produced in the UK ? Maybe conversion costs and issues are not as cumbersome as we tend to think.

Isn't it all about the brand though? If A2 milk is going to be imported into the UK from european neighbours they certainly will not be able to use the A2 branding. So what do they do to differentiate when all the marketing has been centred around A2. "A1 free" doen't seem to ring through or variations of that because most consumers wouldn't draw the relationship between the two. All they know is that A2 is good and non A2 isn't so good. Any branding with anything to do with A2 would be a breach of copyright.
Finding it difficult therefore to see snoopys death spiral for A2 milk company Ltd should the marketing effort promoting the A2 brand in the UK and USA not gain any traction. Sure, the shareprice would be battered but I guess the company would reconsolodate back to Australia and then start paying dividends.
At least at that point there would be no debt accrued to repay. I suspect that ATM will prudently determine its effectivemness going fwd with the marketing outlay committed to developing marketing share without going into debt.

[iceman]

Isn't it all about the brand though? If A2 milk is going to be imported into the UK from european neighbours they certainly will not be able to use the A2 branding.

Harrie I am looking at it as a positive for a2mc. I am considering whether it may be an option for a2mc to more quickly and less costly certify and convert farms in the Nordic countries, to supply the very large UK market with fresh 100% A2 milk. All under the A2 brand of course. Just pondering why it needs to be produced in the UK

[Harrie]

NT doesn't think that there would be a supply problem but I guess with so much natural supply of A2 milk in the nordic countries its a good supply fall back position. I suspect though as sales of A2 gain traction in the UK more farmers will be willing to convert especially if they can see a maintainance of premium price as the popularity of A2 milk consolidates and grows market share.

[Ginger_steps_]

Harrie I am looking at it as a positive for a2mc. I am considering whether it may be an option for a2mc to more quickly and less costly certify and convert farms in the Nordic countries, to supply the very large UK market with fresh 100% A2 milk. All under the A2 brand of course. Just pondering why it needs to be produced in the UK

I was living in norway for 2 years, 2 years ago. Milk there costs between 3-4 nzd a litre. I guess their expenses are much higher as the majority of the country is under snow 8-9 months of the year. Norway may not be the best example however as sweden and finland are about 30-40% ish cheaper with less snow year round.

[Ginger_steps_]

Heres a photo i took at my nearest Aldi 2 days ago - hard to see all the labels but basically every milk product you can see in the photo is "Farmdale" milk (the ALDI brand) except of course a2 (in the top left corner). It retails for $4.40 (60c cheaper than anywhere else). https://www.dropbox.com/s/thvqi5pm7v...06.15.jpg?dl=0

And heres an article to go with it: http://www.abc.net.au/news/2014-11-2...ction=business

Just as Costco is a great partner when taking a2 to the states, I imagine Aldi will prove an excellent partner for introducing a2 to the rest of Europe. The future looks bright!