FIVE ISSUES OF COMPANY
THE A2 MILIK COMPANY
HI5004 MARKETING MANAGEMENT
The A2 milk company Limited (previously known as A2 Corporation) is the business of pioneering A2 milk and engaged in the commercialization of intellectual property. It is not only popular in New Zeeland, Unit Kingdom and Australia local market but also rise by China’ Daigou in recent year.
There are three reasons that why we choose A2 Milk.
Firstly, compare with others milk brands A2 milk has a high competition because they has a different character with others brands- only A2 milk produce A2 protein, which is without A1 protein; and it is unique benefits of the people health.
Secondly, due to most of the Chinese milk scandal made the whole industries lost their trust and reputation among in nations, many young parents seeking the overseas milk brands for their baby or family, which are health and high qualities. In this situation, A2 milk gets a good opportunity into Chinese market. According to Simone& Jonathan (2017), the mandatory application to the China Food and Drug Administration (CFDA) approved as a long-term partnership with A2 milk. Face the huge Chinese market share, A2 change their new look in the market. The new logo change the color from green to bright green background and adding blue and red colors in order to distinguish full cream milk and skim milk. They try to give the new idea for their customers that their milk as fresh as the bright color.
Lastly, due to the produces promote in Chinese market, A2 Milk have a good marketing planning. We believe that we can learn some successful experiences in here.
Therefore, we choose this company for our report.
The A2 Milk Company is known by its fresh milk and infant formula, the key resources are the certified farms that have all their cows being DNA tested that produce A2 milk only. This not only allows those who have trouble drinking regular cows’ milk to enjoy A2 milk and the nutritious goodness but also distinguish the A2 Milk Company from the other dairy producers.
The A2 Milk Company provides high end dairy product to those who chase healthy living style. They concentrate on having safe and healthy food for themselves and their family members. They generally care the quality and benefit from the product more than its price and they are more likely to pay a higher price for better goods and services. The A2 Milk Company also targets on those customers who have trouble drinking regular milk. The unique full A2 milk can satisfy those who have unique requirement. Moreover, the A2 Milk Company also exports trusted dairy product to the overseas countries in which the public trust foreign brand than more than local brand. For example, in 2008 China, the milk scandal made most of the Chinese baby parents lose faith on local brand then start to choose imported infant formula.
There are 28 certified A2 Milk dairy farms that produce pure and natural A2 milk from specially selected cows right across Australia. The A2 Milk Company values the efforts of the milk farmers and builds long term relationships with farmers. It pays the milk farm premium price to maintain the quality supply of A2 milk. The A2 Milk is the only milk brand distributed through all six key grocery retailers in the Australian market. The local retail giants such as Coles and Woolworths make the A2 milk available across the country and acquire over 9.3% market share for the fresh milk and 26% for the infant formula. At the same time, the A2 Milk is exported to the US and Asian countries. China is regarded as the country that has the highest demand of infant formula. The A2 Milk Company cooperates with cross-border e-commerce channels such as Tmall Global and JD Worldwide to sell ANZ label infant formula. At the same time, the A2 Milk Company provides Chinese label infant formula from New Zealand to China. There are more than 3800 mother-baby stores in more than 50 cities selling Chinese label A2 platinum infant formula.
Competitors and threats
In local fresh milk market, the A2 Milk’s main competitor is Lion who carries the brand Dairy Farmers and PURA. Dairy Farmers is the most storied milk producer in Australia. It was founded in 1900 and acquired by Kirin Holdings in 2008 and became a brand under National Food. National Food and Lion were merged to become Lion Dairy & Drinks in the following year. This Australian dairy giant occupies 32% of the market share of fresh milk which is absolutely the major player in Australian drinking milk market. In 2014, Lion labeled its main milk brands PURA and Dairy Farmers as “Naturally contains A2 protein.” made the competition more intense.
According to the milk price crisis in 2015, the “a dollar milk” in retail market in some extent made branded milk struggling as they put more money into their supply chain. There is less potential that new entrants join the market due to the intense competition and fuzzy future against private brands.
China is the main marketing country of A2 Milk Company’s infant formula-a2 Platinum. The local regulation may have great impact on the sales activities. Due to the infant scandal in 2008, China Food and Drug Administration have set up strict rules for both local and imported milk product. It requires all the milk exporters to be registered.
The A2 Milk Company also engaged in a legal battle against Lion because of the A2 protein label on PURA and Dairy Farmers products.
There is also a debate about A1 proteins is harmful or not. The A2 company claims that milk containing A1 proteins are harmful. However, a 2009 European Food Safety Authority review of scientific literature fount there was insufficient evidence to prove that bioactive peptides in A1 milk have a negative effect on health.
Market intelligence studies the international context to adapt companies’ strategies to the destination of their products or services. A first option for obtaining this information is to purchase specialized market reports or to commission specific market studies. A second option consists of directly researching the field and visiting the market. It is also possible to open representation offices in the target market to collect information (Americas, 2016).
Nowadays, people pay more and more attention to the health and safety of baby's food. In particular, infant milk powder is crucial to the early growth of the babies. Because milk powder can provide many vitamins and trace elements to meet the nutritional needs of infants, which is not available in breast milk. As a major livestock husbandry, milk powder produced in ANZ regions are favored by people all over the world, and A2 is the only milk powder in the world that contains only A2 beta-casein protein, which has received widespread attention and recognition for its distinctive features.
In the Australia milk powder market, A2 faces a lot of competitors, include Aptamil, Bellamy, Karicare and Nestle NAN etc. Among them, Bellamy is the biggest competitor for A2. As an Australian local brand, compared to A2, Bellamy has three advantages. Firstly, Bellamy brand history is relatively longer, it was founded in 1993, and it has a higher degree of awareness in people's minds. Secondly, Bellamy is a real organic milk powder. Organic means 100% original, green food, it does not contain any “artificial” substances. Last but not least, the retail price of Bellamy is lower than A2. This is why Bellamy had been selling more than A2 in previous years.
In recent years, A2 Company put more marketing expense to dive its growth in China and the US. Especially in China, in 2016, the Chinese government announced the full implementation of the "two-child" policy so that people will have more demand for advanced safe and healthy milk powder. A2 sells through supermarkets, pharmacies, Daigou trade to China and online channels, sales in to China meanwhile have jumped 150% since 2016 (Sprague, 2017). A2 milk powder has become the product of choice for Chinese consumers. Up to now, A2 earnings before interest, tax, depreciation and amortisation rose 120% to $NZ 78.4 million while revenue climbed 69% to $NZ 262.2 million (Sprague, 2017). In this process, the collaborators not only fund the A2 Company but also represent and expand the sales tasks. Currently the institutional investors are supportive of the company to identify opportunities to find growth from surplus cash flow.
Looking ahead, A2 will further pursue two main strategies to drive future growth: horizontally into adjacent categories and geographically into large overseas markets. Meanwhile, A2 will focus on the new technology research and development, professional services as the carrier of refined marketing and building efficient supply chain system as well.
The A2 Milk Company is in the business of marketing, producing and selling premium branded dairy nutritional products in targeted domestic and global markets.
The A2 Milk Company has occupied 10 per cent of Australia’s fresh milk market since it first hit shelves in 2003. Compared with other private-label milk, the A2 Milk Company charges a retail premium of 30-40 per cent, which is $2.80 a litre. The company’s product range from long-life milk, full-cream, light and no-fat milk, milk powder, cream, yoghurt, ice cream to infant formula in Australia, New Zealand, the UK, US and China, differentiating itself from boasting of digestive benefits on the premise the A2 protein found in milk is easier to stomach than A1 protein. Therefore, the target market for A2 Milk Company will be both national and international middle to high-end customer who prefer to eat more healthy food and especially the intolerance to A1 protein people.
Market segments include demographics segmentation, geographic segmentation, psychographics segmentation and behavioral segmentation. In demographic segmentation, the market is divided into groups on the basis of variables, such as gender, age, occupation, income etc., which often associated with the consumer’s needs and wants. As the wide range of products from infant formula to adult milk and from long-life milk to fresh milk, A2 milk is a gender-neutral drink and from baby to adult. The premium price majority accepted by the medium to high-income customers, and may included young families, employees, professional, pregnant women and etc. Nowadays, global consumers are becoming increasingly focused on their well-being and health, leading to significant growth in growth in health and wellness dairy products markets. This global well-being growth trends provide great opportunities for A2 Milk to expend their foreign markets. The geographic segmentation for A2 Milk Company is global presence, including Australia, UK, NZ, USA and China. Psychographic segmentation uses lifestyle of people, their interests, activities, attitude as well as opinions to define a market segment. The A2 Milk Company market itself in the position where customers want product that good for their health and have the knowledge about benefit of A2 protein. Health care professional programs are a key way of introducing A2 Milk Company branded products to consumers. Moreover, A2 Milk Company also largely attracts customers who don’t get on with regular milk, which is around 19% of milk drinkers in Australia. The A2 protein milk category had become a price leader, which provided a headline price comparison point in the battle for the supermarket trolley. The behavioral segmentation divides the population on the basis of their usage, behavior and decision making pattern. The A2 Milk Company prompts customers to link their branded milk with improved digestive comfort and the reduction of milk sensitivity symptom. In addition, milk sensitivities are an increasing consumer concern and therefore strongly affect the purchasing of young families.
The positioning for A2 Milk Company can be the feel the difference. Milk source is the key point making the A2 milk products different from others. A2 milk is cow’s milk that contain only the A2 type of beta-casein protein rather than the more common A1 protein commonly found in regular milk which especially does not contain the proteins are at risk of causing some kind of disease (Keith, 2009). In the Australia dairy market, there are variable prices with variable healthy images across different brands. Woolworth home-brand dairy products show a poor healthy image, but with a very low price. This is because the previous Woolworth home-brand was designed as a poor quality and cheap price. Dairy Farm is the popular brand with an average price and medium healthy image, as they set the acceptable price and with a providing delicious and high quality local milk source image. A2 Milk Company is the increasing popular brand with a relatively high price and a strong healthy image, as they raise the concept that A2 protein can improve digestion and do not has any harmful risks to differentiate from other milk companies. Furthermore, there are some indirect competitors to A2 Milk Company, such as Bonsoy and Eco mil. Bonsoy is famous for its soymilk, which the price is relatively high and the health image is medium. The reason is that individuals who are vegan or lactose intolerant now often use soymilk as a substitute for dairy milk, but whether soymilk is 100 percent benefit to us is still controversial. Eco mil almond milk is at a very high unit price and medium to high healthy image. It is suitable for vegan or lactose people as well, and has proteins both from nuts and milk.
Companies need to find the position of their products in the market, so that it could best serve the needs of its customers, while gain better competitiveness. In this case, as the diagram above shows, the A2 Milk Company positions itself as the healthy brand with only A2 protein. Therefore, products differentiation ensures them to compete with the conventional dairy product and increase their bargaining power. The perfect balance between the price and the healthy image could let the company well serve the customers who like to be healthy.
When we provide outstanding customer service, we create a positive experience and market our brand to our customers. In turn, existing customers may spread the word about our excellent service and we can win referrals. Due to the fact of first mover advantage, A2 Milk Company workers are various and high quality. The company has been recruiting the right people, training its staff to develop their skills and retaining good staff. Throughout the A2 Milk Company, there are workers directly employed in dairy product manufacturing, dairy farming as well as range of other professions. For instance, food scientists, production workers, farmers, veterinarians, agronomists, engineers, refrigeration experts, drivers and electricians. The A2 Milk Company is committed in providing market leading customer service. In order to achieve best customer service, A2 Milk Company has an experienced and caring team of nutrition professionals (pediatrician and dietitian) who are committed to provide their expertise and support to help parents make the best nutrition choices for their infant or toddler. Customers can dial the company toll free line for any enquiries (Commission, 2014).
In term of process, A2 Milk Company seeks to improve its processes in the supply chain to deliver better to customers. Process refers to the processes involved in delivering the products and services to the customers. Having good process in place ensures that we repeatedly deliver the same standard of service to our customers and thus save time and money by increasing efficiency. (Queensland, 2018) Streamlining of processes is used to cut cost which adds value to its customers. As an example, milk collected from A2 milk dairy farms is separated into skim milk and cream to make both skim milk powder and butter. The skim milk is evaporated and spray dried to produce skim milk powder while the cream is churned to make butter. These processes increase the productivity and reduce wastage. (Commission, 2014) Besides, A2 Milk Company has simplified process of buying its product by offering online supermarket. This is a win-win situation because the company can decrease the product cost and consumers can buy at a lower price.
Physical evidence refers to everything customers see when interacting with the business. This includes the physical environment where we provide the product or service as well as the packaging and branding. Although A2 Milk Company does not have its own physical outlets, its products can be easily obtained in any Australian retail stores such as Coles and Woolworths. The label and sign of the products clearly deliver the company message of A2 Milk as more easily digestible and more suitable milk for consumers than milk containing both A1 and A2 beta-casein protein. In addition, various kind of advertisement (TV, newspaper and internet) has been posted by the company to promote of drinking milk containing only A2 protein. In response, its rivals questioned whether there was any health benefits associated with A2 milk. Dramatically, the rival has then highlighted that their own products also contain A2 protein though. Hence, in view of consistent positive consumer acceptance of the benefits of A2 protein, A2 Milk Company should consider introducing its product to new countries such as South America. (Credit Suisse, 2016)
The A2 Milk Company takes their advantage in the local market, especially in 5Cs include company, customers, collaborators, competitors and context. They provide high end dairy products to people who chase high quality and healthy living style. A good company strategy should understand what their customers need is and want. Therefore, the A2 Milk Company spends huge money to do the market research in order to attract their new customers or market share, their though analysis the Chinese Daigou behaviors development their market share in China market for example, there must bring the new problem to A2 Milk, which need they change their planning in the future.
A2M Ltd. (2017) FY17 Annual Results Presentation. Available at: https://a2milk.com.au/ (Accessed: 30 January 2018)
Australia, D., 2017. Dairy Situation and Outlook, June 2017: Report to the Australian Dairy Industry. Dairy Australia, 27.
Christopher, A., 2014. “Pressure on exporters of baby formula.”, The New Zealand Herald, Auckland, 9 July 2014.
De Noni, I., FitzGerald, R.J., Korhonen, H.J., Le Roux, Y., Livesey, C.T., Thorsdottir, I., Tomé, D. and Witkamp, R., 2009. Review of the potential health impact of β-casomorphins and related peptides. EFSA Sci Rep, 231, pp.1-107.
Iacobucci, D., 2014. Marketing Management (MM), 4th edition, Southwestern, Cenage Learning, Mason.
Productivity Commission, 2016. Relative Costs of Doing Business in Australia: Dairy Product Manufacturing. Productivity Commission, Government of Australia Research Reports.
Sprague, J., 2017. The A2 Milk Company considers dividends as profit surges. Australian Financial Review, 2017
Woodford, K., 2009. Devil in the Milk: Illness, Health and the Politics of A1 and A2 Milk. Chelsea Green Publishing.
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