A2M $3 Party, page-87

Thanks for the additional insights on A2M management, Lainn.

The main objective evidence I have to back up my opinion is that the shelves are empty 90% of the time and thus they have not planned to meet the current demand. Yes, maybe I am being harsh because the demand seems to have caught the whole industry by surprise. However, each IF player should have enough understanding of their strengths and weaknesses so as to mitigate the risk of not meeting demand. As A2 milk production has its own challenges and lead times, then I would expect a more sophisticated strategy than just putting ads out for more A2 milk farmers to its current supplier (SML). How about having previously setup a second manufacturer in an A2 milk rich region, eg. in Australia which could also ramp up production and divert some of the milk from lower margin products such as A2 milk powder and A2 UHT milk to IF (I'd much rather see those shelves empty!). What will happen if SML have issues with their China license? It will take a long time to establish another manufacturer with China license if it is not already in place.

With regards to regular updates, at the AGM, A2M committed to quarterly updates due to the rapidly changing nature of the market and to ensure the market is fully informed (not relying on anecdotal daigou stories, checking on tmall sales etc). So far they have honored that commitment and you can see that it was needed due to the huge changes in EBITDA. Based on the share price jump on last update, the market changed its opinion on the value of the business. I think a Q3 update is important to at least ensure the market is fully informed, even if no change to guidance. If you are concerned about people getting burnt, then this would help minimize that and provide a smoother share price movements (sorry to all the day traders out there).