New Zealand's a2 milking China's consumer demand

New Zealand-based milk producer a2 Milk Company will invest in marketing and improving product quality, in hopes of tapping the tremendous consumer demand for high-quality milk in China.

a2 Milk Company currently distributes its a2 Platinum infant formula and a2 Milk through major cross border e-commerce channels and 4,000 mother and baby retail stores in China.

During the Singles' Day sales on Nov 11 this year, the a2 Platinum infant formula was ranked as the top selling infant formula on Kaola.com, ranked second on JD.com and third on T-mall, the company statement said.

"The a2 Platinum infant formula accounts for 4.1 percent market share of the whole infant formula market in the country. We strive to enhance the market share ratio to 5 to 10 percent in the years ahead," said Geoff Babidge, managing director and chief executive officer of a2 Milk Company.

Besides China, a2 Platinum infant formula and a2 Milk are also available in Australia, New Zealand, the United Kingdom and the United States.

"We will invest in distribution and marketing to enhance awareness of the benefits brought by our products, which will support further growth of market share," added Pater Nathan, Asia-Pacific chief executive of a2 Milk Company.

The a2 Milk brand is not a product of a technological process or genetic engineering. The milk products contain only A2 protein and are free from A1 protein, making them less likely to result in digestive issues.

China and other Asian markets contributed 133 percent growth in segment revenue and a 258 percent surge in operating EBITDA (earnings before interest, taxes, depreciation and amortization) in the 2017 financial year, according to the company's 2016-17 annual report.

For China and other Asian markets, the percentage increase in segment revenue and operating EBITDA are both significantly higher than the Australian and New Zealand market combined, as well as the UK and US markets combined.

The Chinese market has achieved a 150 percent year-on-year hike in infant formula sales in the 2017 financial year, the report added.

The milk producer's group revenues soared to NZ$550 million ($374 million) in the 2017 financial year, a jump of 56 percent year-on-year, whereas revenue generated by a2 Platinum infant formula rose 84 percent.

"The infant milk formula segment could ride on the second-child policy in China, better visibility in product registration effective in 2018 by China Food and Drug Administration, and the revised tax regime for purchases via cross-border e-commerce," according to a China dairy sector report in July conducted by DBS Vickers Securities.