a2 Milk faces massive competition as Nestle launches in China

Nestle, the world's biggest food and beverage company, has launched a brand of infant formula that uses the A2 beta-casein protein made popular by the New Zealand and Australia-listed a2 Milk Company.

"I can confirm that we are currently launching an A2 product under the Illuma brand," a spokeswoman for the company in Australia said in an email to the Herald.

No other details were immediately available, but the product is already understood to be available in China, marketed as Illuma "Atwo".

This Swiss company has been the largest food and beverage company in the world since 2014. Its products range from baby food, to cereals, to dairy products and to snacks.

Fortune magazine last year ranked Nestle as the world's 64th biggest company.

The a2 Milk Co has said previously that it expected broader interest in the A1 protein-free category to emerge over time.

"It has been monitoring a number of companies operating in China and considers that new entrants should assist in building credibility and awareness for the A1 protein-free proposition, and hence build the overall category more quickly," the spokesman said.

He said that a2 Milk, as a pioneer in the A1 protein-free category, "considers itself well positioned to benefit from overall category expansion".

The a2 Milk Co has risen through the ranks to become New Zealand's biggest company by market capitalisation.

The company's rapid growth has was first prompted by the enthusiastic take-up of a2 milk in the Australian fresh milk market.

It then branched into infant formula, which turned out to be equally as popular.

A2 Milk's big break came from the so called "daigou" traders in Australia, who sent infant formula to the People's Republic outside the conventional import/export trade channels.

The company now has 5.4 per cent of the Chinese infant formula category market share across all channels, including both online and offline, and is growing rapidly.

The company spent its early years ensuring that it has intellectual property protection around the world to register the A2 brand the science that lies beneath it.

In February, the company said it had formed of a comprehensive strategic relationship with Fonterra, encompassing a range of supply, distribution, sales and marketing arrangements in targeted markets.

The company had earlier reported a 150 per cent lift in its first-half net profit by 150 per cent to $98.5 million.

The a2 Milk Co was founded in New Zealand in 2000 by scientist Dr Corran McLachlan, with the support of business partner Howard Paterson, following the discovery that cows naturally produce different types of milk proteins.

Most cows produce the A1 and A2 versions of beta-casein protein, but about 30 per cent of the world's herd produces just the A2 variety.

A2 Milk believes that the A2 beta-casein protein milk is better for people, particularly those who have trouble digesting milk.

Last year, a2 Milk reached an out of court with Australia's Lion - Dairy & Drinks over a labelling dispute.

The parties mutually agreed not to proceed with their cases against each other. The terms of the settlement were confidential.

Early this month, Australia's Freedom Foods launched an a2 protein milk.