“these position changes by the NDC reflect pressure they're feeling from within their own membership.” ==========================
Exactly right. Our US CEO was very aggressive in his criticism of the Dairy Council and they come back with quite a timid response, something like.... we’re not too sure ‘bout the science, not really our job to test proprietary claims BUT the market is talking and we may need to have a look.
We also have the Fonterra about turn, now joining us to spread the love when I feared they would become a powerful foe. We have Nestle’s tentative first steps, the appointment of a new CEO, hired for her strategic strengths in a disruptive Company, and then the massive marketing spend in the second half.
This is what ties all these things together...
The dairy farmers.
It’s well known they’ve been getting screwed for a long time now. Low margins, the rise of plant-based alternatives, falling milk consumption - just horrible economics. The farmers need a way to improve their margins, in essence, an excuse to lift prices and get the consumer to pay more. Think of it, there are many instances where the Consumer is paying more for bottled water than they are for milk - that’s just a travesty in my opinion. Along comes A2 milk, a way to differentiate milk without getting rid of the cow. It’s natural and we know milk has superior health benefits to the plant-based alternatives. Farmers everywhere must be screaming to join the revolution. This is why Fonterra joined us, this is why the NDC is careful not to discredit the A2 claim. Because that is where the industry is headed. A2 is the wider industry’s best chance to lift margins and return to healthy profits.
What does it all mean for us?
First up, when competition arrives, we know that it adds substance to our claims that A2-only is easier to digest.
We know why the competition is coming. Because the farmers want a differentiated product with which they can earn much better margins. To me, this says there will be little, if any, margin compression. This is not a situation where farmers will compete on price because they’ll end up back where they started - earning shite all for all their hard work. This is the excuse they’ve been waiting for to ask higher prices for their product.
So, for us, first mover advantage is massive. When consumers think A2 milk, we want them to think the A2 Milk Company. A product beautifully presented, and of the highest quality. Our reputation is growing and this massive marketing spend in the second half is no coincidence. This is A2 Management at their finest, going in for the kill and pressing home our advantage. And, how good is our branding; could Management have chosen a better name for the Company. This name will be so extremely valuable for us going forward.
So what does the milk industry look like in a decade’s time, and who will be the dominant global player? Will Fonterra and A2 join forces? Will a multinational take us out? I bet they wish they did just a few short months ago.
A2M Price at posting:
$11.70 Sentiment: Buy Disclosure: Held
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