ATM - A2 Milk Corporation Limited

[Harrie]

Read it Mac. I'm excited by the way a2mc is strategically and judiciallygrowing the brand . Setting up in Denver which is over the rockies as a mid way admin point for further expansion in the USA is a real statement of intention. How confident is that!

I'm thinking that things may move a little faster than they are anticipating but I guess its all about supply.
If the demand increased significantly could the supply meet that demand? If so maybe a cash issue could be on the cards but in those circumstances its likely to have a handle of more around the 60 and 70 mark.

[MAC]

Holy moly! Good find MAC!

Kroger stores = 2640
Safeway stores = 1335
Whole foods stores = ~400

Of course ATM won't be in all of them, only some on the west coast states, but being represented in probably over 500 stores (West Coast states ~15% of US population) is a damn good start. If they are successful and get a nationwide supply deal, that gives them the ability to be in ~4300 stores throughout the US.

Going in straight away with four products too shows some big confidence don’t you reckon Blobbles, there must be some pretty damn positive market research in behind that as an initial move.

Checking retail prices, a half gallon of Kroger milk (home brand) retails for $1.25, a2mc look to enter the market at $4.00 to $4.50.

Thus, it looks like similar margins to the Australian operation, nice !

[Rego55]

Well well, that’s sooner than the “later in the year” reported just a couple of days away.

Onward and upward big time !

“A2 milk which will be sold in half gallon cartons for $4.00 to $4.50 with the strapline ‘The milk that might change everything’ – will arrive in several leading grocery stores from Kroger and safeway to whole foods, supported by advertising , in store demos, radio ads and a digital marketing drive.”

http://www.foodnavigator-usa.com/Man...ornia-in-April

Thanks very much for posting that Mac. Really interesting read and I appreciate all the articles/entries you find and post that help lazy buggers like me out!!

[babymonster]

Going in straight away with four products too shows some big confidence don’t you reckon Blobbles, there must be some pretty damn positive market research in behind that as an initial move.

Checking retail prices, a half gallon of Kroger milk (home brand) retails for $1.25, a2mc look to enter the market at $4.00 to $4.50.

Thus, it looks like similar margins to the Australian operation, nice !

cannot wait for its launch... thanks MAC

[blobbles]

That news article is also on the front page of the food navigator site, which gets 51k daily views. Nice way to get the word out, hopefully the story will be picked up by other sites and reposted...

[blobbles]

Going in straight away with four products too shows some big confidence don’t you reckon Blobbles, there must be some pretty damn positive market research in behind that as an initial move.

Checking retail prices, a half gallon of Kroger milk (home brand) retails for $1.25, a2mc look to enter the market at $4.00 to $4.50.

Thus, it looks like similar margins to the Australian operation, nice !

I think it is probably necessary to launch with the 4 they have, particularly if you are doing it to a health concious market. But yeah, good confidence shown, looks like the USA team maybe paying for themselves pretty soon.

Just running some numbers:

Say 500 stores @50 bottles per week, per store and A2 making $2.5 per bottle (these are all just guesses really) = ~$3.25m a year in revenue in USD terms?

If they went nationwide at the same ratios it would be ~$28m a year in revenue, but lets not get ahead of ourselves :-)

[sb9]

http://www.nbr.co.nz/article/steady-...lk-db-p-169340

Good article in NBR today

[babymonster]

http://www.nbr.co.nz/article/steady-...lk-db-p-169340

Good article in NBR today

not a pay customer...

[sb9]

For those that don't have access to paid content from NBR..

‘Steady as she goes’ approach pays off for A2 Milk..

With its sales going gangbusters in Australia, the A2 Milk Company [NZX: ATM] should have a great springboard for global expansion.
But nothing is ever that simple and chief executive Geoff Babidge is the first to admit the company has previously battled to gain traction in markets further afield.
That’s why he’s taking the next phase of A2’s growth extra carefully.
To be fair, some of the company’s previous difficulties have been out of its control: For example, it launched its branded infant formula into China in November 2013 around the same time as Fonterra’s botulism false alarm.
The subsequent regulatory reform in China has slowed that initiative, which is something the company is working hard to get back on track.
At the same time Mr Babidge must be extra pleased with results from the Australian business, which effectively drove A2’s 27% increase in underlying earnings to $3.27 million in the first half.
Total revenue of $74.79 million was up 38% on the previous corresponding period. The company still made a loss due to one-time costs associated with its planned Australian listing, an increase in other operating costs and an income tax charge of $1.56 million.
A2’s share price rose a further 6% to 59c yesterday having put on 10% on Wednesday following the result.
Investors are now focusing on the growth opportunities in the UK, China and the US.
Mr Babidge says the company continues to make progress in resuscitating sales momentum in the UK liquid milk market as well as the infant formula market in China, where it spent $1 million on marketing despite having limited product on the shelf.
“Sales of product in second half will increase,” he says, “and certainly we are looking at [financial year] 2016 being at least break-even up there.”
He expects the company to ramp up sales In the UK in the second half of the 2015 financial year, having gained access into Sainsbury supermarkets as well as Tesco and established a revised business model.
First NZ Capital has an “outperform” rating on the stock, noting yesterday that the result exceeded its expectations.
Leveraging the company’s successful Australia model globally remains key. If A2 can successfully execute that strategy in the UK, China and US it could justify a “spot” valuation of $1.24, the brokerage says in its research note.
First NZ has upgraded its target price from 55c to 76c.
Breaking new ground
The United States looms as another opportunity and A2 is targeting a launch into the fresh milk market of the West Coast in the fourth quarter.
The plan is to launch through a wholly owned subsidiary with packaging outsourced.
Mr Babidge tells NBR the company has been developing a plan for the US for two years now.
“It’s a very attractive market. We are going to be very disciplined how we move with respect to that focusing on one region on the West Coast.”
The idea is to tap what he calls the specialty milk market, which includes organic products and milk alternatives like A2 is renowned for.
“It’s a very large, interesting dynamic sector in the US market - certainly compared to every other key milk market that we have investigated.”
Since November A2’s management team have been presenting their product to key retailers in the US and getting a very good response, he says.
First NZ’s analyst calculates a cash burn of $US20 million spread over the next three years for A2 to implement its strategy up there.
But the payoff looks promising.
“Based on our previous ‘what-if’ analysis for A2, if it were to successfully enter and execute its plans in the Californian liquid milk market, there is clearly significant value that could accrue to the company,” First NZ says, adding that it estimates the upside at 23c a share.
Mr Babidge says the company is focused on balancing revenue and growth with marketing and investment.
“If you look at the real health of the business, it's reflected in the Australian business performing exceptionally strongly in both revenue and earnings. .”
The company also announced a new chairman designate in FMCG industry veteran David Hearn to replace retiring incumbent Cliff Cook, and has lodged an application for listing the company’s securities on the ASX.

[MAC]

That’s a little higher than my FY15 $1.10 DCF workup, but I’ve not yet revised for US growth as early as April.

There’s no reason that the SP should not go well over $1 once AMP are done, bring on the ASX listing.

“First NZ Capital has an “outperform” rating on the stock, noting yesterday that the result exceeded its expectations. Leveraging the company’s successful Australia model globally remains key. If A2 can successfully execute that strategy in the UK, China and US it could justify a “spot” valuation of $1.24, the brokerage says in its research note”.

“Based on our previous ‘what-if’ analysis for A2, if it were to successfully enter and execute its plans in the Californian liquid milk market, there is clearly significant value that could accrue to the company,” First NZ says, adding that it estimates the upside at 23c a share”.