NZ-based infant formula producer, A2 Milk has attributed its success and 22.1% jump in its net profit to a brilliantly executed marketing strategy in China.
In the first half of its financial year 2023, A2 reported a remarkable 43.5% growth in China label sales despite the overall China infant milk market experienced a downturn with negative -12.5% growth. Most players blame the country’s low birth rates as the main reason for the downturn.
China is A2 most important consumer market representing nearly half of its total revenue. With declining birth rates, it will have to intensify its struggle with other players to gain a bigger slice of a shrinking market. Currently, A2 holds just 5% share of the market and it is the 7th largest brand in this segment where there are hundreds of local and foreign brands. A2 however focuses on the niche ultra-premium milk segment which is currently valued at US$40 million. This probably gives it a competitive advantage as well as differentiate its brand from many other players.
Nevertheless, David Bortolussi, CEO of A2 milk said that its daigou (reseleer) channel of its English-label business suffered 39.5% decline due to China’s harsh zero-COVID lockdowns. He signalled the need to reassess the role played by the daigou channel in driving A2 future growth.
The daigou channel, used to be A2 as well as many other milk players main engine of growth, was crippled at the onset of the pandemic, which cut off international travel and stopped resellers from bringing infant formula product in and out of the country.
The company has ramped up engagement with daigou resellers and has created a dedicated marketing team. David emphasised that daigou is still an important marketing channel for the company despite the poor performance.
