Nestle set to launch A2 formula in New Zealand and Australia

A2 Milk has long enjoyed first-mover status with its alternative infant formula but will soon have to contend with more competition when international food group Nestlé rolls out an a1-beta free product on its home turf over the next two months.

Nestle launched an A2 beta protein infant formula in China, marketed as "Illuma two Stage 3", in February this year.

Tarun Malkani, category business head for Nestle, told the Herald that the product had met expectations in China and that Nestle was now looking at distributing it more widely there.

Speaking in a phone interview from the company's headquarters in Switzerland, Malkani said Nestle will launch an A2 beta protein formula "NAN A2" in Australia this month and "S-26 Atwo" in New Zealand in November, adding the company was also open to launching an A2 beta protein formula in other geographies.

"We will always be inspired by the power of breast milk and we will never replicate it," he said.

"A2 beta casein is product that is similar to the breast milk beta casein," he said.

"A2 was the original form of the beta casein from cows when they were domesticated thousands of years ago, so for us, this gives us an opportunity to go to the origin of that particular protein," he said.

"We have got the DNA and gene selection technology where we can identify cows and separate the herds," he said.

"The consumers have expressed an interest and we must respect consumers' interests and desires," he said.

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.

NZX and ASX-listed A2 Milk, which has enjoyed a 10-year jump on its competitors, contends that A2 beta-casein protein product is better for people, particularly those who have trouble digesting milk.

The company has enjoyed a strong take-up of its proposition in Australia, where it now makes up about 10 per cent of the fresh milk market and 32 per cent of infant formula market.

Likewise, a2 Milk's "Platinum" infant formula brand has found favour in China, where it now makes up about 5 per cent of the market there.

"Certainly Australia has strong awareness and adoption by the local population," Malkani said.

"We are watching and monitoring where else we can make an entry," he said.

"We have known about this protein for some time. Scientists are well aware of the composition of the beta casein product."

Malkani said Nestle's a2 milk comes from various global suppliers.

Nestle's New Zealand and China infant formulas come under its Wyeth Nutrition brands, while Australia's is under Nestlé Nutrition.

Asked for comment a2 Milk's chief executive, Asia Pacific, said a2 Milk had built a strong market position through investment in brand awareness.

"We're confident this will stand the company in good stead as the A1 protein free category continues to grow," he said.

"We have always expected competitors to emerge within the category, and in fact we welcome competitive initiatives.

"As the pioneers, we stand to be benefit from first mover advantage and the further validation that competition brings to the A1 protein free proposition," he said.

Early in the year, Australia's Freedom Foods said it would launch its own A2 milk range.
In February, dairy co-operative Fonterra said it had formed a strategic alliance with a2 Milk.

Nestlé is the world's largest food and beverage company, with more than 2000 brands ranging from global icons to local favourites, and a presence in 189 countries.

In August, a2 Milk reported a 116 per cent lift in its net profit to $195.7 million for the June 30 year, driven by a big leap in infant formula sales into China and Australia.

Revenue came to $922.7m – an increase of 68 per cent over the prior corresponding period.

A2 Milk shares last traded at $9.50, down 71c or 6.9 per cent from Wednesday's close, while the broader was sharply weaker in aftermath of a 3.15 per cent decline on Wall Street's Dow Jones Industrial Index.