Competition heats up for a2 Milk Company

Regular milk contains both A1 and A2 proteins but some cows naturally produce milk without the A1 protein. Proponents of A2-only milk say the A1 protein causes indigestion for many people, while critics say more research is needed to substantiate the claim.

Now, several other companies, including the world's biggest infant formula maker Nestle SA, have decided to sell their own brand of A2-only milk powder in China and other countries, which Mark Brown, chief investment officer at shareholder Devon Funds Management, said raises a question about the sustainability of a2's success and its strategy.

"The problem you have is that a2 goes from this unique selling proposition to a 'me too' brand," said Mr Brown. "I'm... concerned about a continuance of the same rapid growth we've had and clearly, then, what you pay for that because the stock is enormously expensive."

Reflecting high expectations built into the stock price, a2's shares dropped 20 percent to a three-month low on Wednesday as investors were disappointed by a company forecast that sales would rise this year by 63 percent.