It's a fair question re: competition, gets asked a lot. Let's...

It's a fair question re: competition, gets asked a lot.

Let's look at it from Lion's perspective.

Consider their margins. At retail price they are selling A2 milk for I think about 15% cheaper than A2M. As Blackforest correctly notes, A2 milk is more expensive to source and A2M commands the lion's share (pardon the pun) of supply, which is part of the reason they are able to achieve strong margins. So you can see already Lion must be accepting relatively worse margins in order to enter this space. But that *could* be an acceptable trade-off if they can take build a bigger stake in the overall A2 milk market or even take some share from A2M. Then consider who is going to buy their A2 product.

1. If you place any weight on their own brand recognition, the first customer source is going to be Dairy Farmers traditional (A1-containing) milk who they convert to A2 milk. So for these customers they are in effect cannibalizing their own revenue. They may be converting them to a more expensive product, but as noted above they have slim margins on that product so they are likely to at best break even.

2. The second source could be A2M customers who believe A2M's milk is too expensive. This also seems an unlikely source as 15% price difference is unlikely to be enough to make A2M consumers switch. People who do find A2M too expensive are much more likely to 'buy out' of the A2 health proposition entirely and switch back to an A1 containing milk for half the price.

3. Another source might be existing consumers of A1 containing milk (but not their own Dairy Farmers brand). Why would they switch to Dairy Farmers and not A2M? If they are switching for health reasons, they will likely try the company whose advertising embraces the health benefits (A2M) rather than Dairy Farmers, which cannot acknowledge health benefits because it requires conceding adverse effects of their A1-containing product range. As in the previous case, if they are already prepared to spend 50% more than they do on A1 milk, the relative difference between Dairy Farmers and A2M won't make much difference

4. The only other source then is consumers of milk alternatives such as almond milk or soy milk due to difficulties digesting A1-containing milk. They may switch to A2 milk when they find it is easier to digest. Who are they going to switch to? Again, probably the company that actually promotes that specific health benefit they are interested in - that alone should tell you it is likelier to be A2M. But might they be persuaded by the 15% saving on Dairy Farmers milk? Again, not likely, as they were already spending 30-50% more than the cost of A2M on those milk alternatives, so they are already making a saving by switching to A2M.

So you can see that due to having the first mover advantage, commanding A2 milk supply and better margins, brand recognition and being able to embrace & promote the A2 health proposition, A2M is in the better position to capture and retain market share as the A2 market grows. You can apply the above template to a lot of the competition A2M faces, because the same issues apply - they have less supply and too slender margins to gain an advantage from cannibalizing their existing, and they are too conflicted with respect to their A1A2 and A2 only products to genuinely persuade new customers on health grounds.

All they do, then, is draw attention to the A2 only proposition and make a case for converting to A2 only, thereby expanding the potential market that A2M is best positioned to capitalise on.