1. Home
  2. News

Trends Hub: a2 Milk Company Facing New Rivals in China’s A2 Protein Milk Powder Market

  •   28 Oct 2019
  •    Shine Hu
  •   Post a comment

    Hot A2 Protein Milk Powder Market

    China, the world’s largest infant formula market, has understandably become a significant battleground for international milk powder companies. The unprecedented success of the A2 milk company in China has sparked huge interest in A2 infant formula products. Growing demand for A2 protein milk powder is prompting development of new products to cash in on this lucrative and promising niche market. According to Smart Path, an e-commerce consulting firm, demand for A2 milk powder in China rose 37%[1] in February 2019 from a year earlier.

    The success of the a2 Milk Company, the pioneer of A2 protein milk powder in China is remarkable. Even more remarkable is that its sales and continued upward trajectory has been achieved in China’s ultra-saturated, ultra-competitive market which is currently in the throes of a period of relative stagnation precipitated by a paradoxical decline in China’s birth rate despite the removal of China’s one child policy restrictions.
    According to the a2 Milk Company's annual report for fiscal year 2019, the revenue of its China business unit reached 406 million New Zealand dollars, up 73.6% year on year. The company’s sales of infant formula in China reached 393 million New Zealand dollars, or about 1.795 billion yuan[2].

    China has become the largest overseas market for the a2 Milk Company[3], just 6 years after it first launched its A2 beta-casein protein milk powder into China in 2013.

    What’s driving demand for A2 milk powder in China?

    First, we need to underscore the important contribution of Daigou to the success of the A2 milk company in China. Daigou is a Chinese term used to the describe a grey market supply chain and retail behavior in which Chinese diaspora buy products overseas and distribute them in mainland China through their own social networks, social e-commerce or established e-commerce platforms like Taobao.

    In its early years, the a2 Milk™ entered the Chinese market mainly through Daigou. The power of digital word of mouth in China multiplied by the vastness of China’s social media networks was instrumental in shaping the fortunes of A2 milk powder in China. Minimal clinical evidence supporting the wide array of health claims made on A2 milk powder across China’s social media networks did little to deter the legions of Daigou selling products with promises of improved digestion in children and amelioration of a host of other health related issues. One of the more interesting and slightly amusing claims that was hugely influential in building demand and reputation for the A2 milk company was that its products could improve symptoms of lactose intolerance in children[4]. In short order A2 milk powder became known as the “Hermès” of milk powder brands, synonymous with luxury, unsurpassed safety, quality and efficacy.

    Although as senior dairy analyst Song Liang stated, the market has been driven by greatly exaggerated claims on the clinical efficacy of A2 milk powder[5], its market position and reputation is now sufficiently consolidated and unlikely to be negatively affected by growing awareness that A2 milk powder isn’t the panacea that everyone was claiming it to be.  

    Hype aside there is actually a growing international consensus on the benefits of A2 beta casein, and it is believed that the A2 protein will provide more health benefits to humans, including its function to improve gastrointestinal symptoms related to milk[6].

    Another important contributor to China’s booming A2 protein milk powder market is an overall trend towards premiumization in the market. Chinese mothers tend to value quality over price, especially those with higher levels of education and income. This trend is driving product development and segmentation within the infant formula sector towards the high-end. A2 protein is a segment with a high growth rate, which can meet growing consumer demand for higher quality products with the best ingredients available.

    Emerging Rivals to A2 milk powder company

    The lucrative A2 milk powder market has inevitably attracted competitors[7].

    Chinese dairy giant Mengniu released its Future Star A2 beta casein milk in 2018. This collection is designed for children.
    Nestlé's Wyeth launched an A2 infant formula in China called "Illuma 3 Atwo" also in 2018.
    NAN, which is also owned by Nestlé, rolled out its A2 formula milk powder in Chinese market in the first half of 2019.
    Later, Danone launched its Cow&Gate A2 beta casein milk powder for China.
    The newest entrant to the market is a product offering from Mead Johnson, which launched an A2 protein milk powder product on various online cross-border e-commerce platforms in October 2019.
    In spite of the recent development and launches of several A2 protein milk powder products, the sales channels for dairy companies are restricted. The a2 Milk Company, previously registered a trademark in China for the use of the term “A2 milk” which has meant that A2 protein milk powder products from Mead Johnson and other companies can only be sold through cross-border e-commerce channels currently[8]

    The a2 Milk Company continues to dominate the A2 niche in China and will be able to leverage several key advantages going forward namely its solidified position as segment leader and its registration of the term “A2 milk” as a trademark.

    The company will certainly face more rivals and challenges as new entrants to the segment Nestlé and Mead Johnson vie for market share. As these companies invest heavily in brand building, promotion innovation, and marketing it is conceivable that market dynamics will change and a new champion of China’s A2 milk powder sector will emerge. Stay tuned for more information.

    Disclaimer: all images used are from the internet.

    Reference link

    [1] Mead Johnson Entered A2 Milk Powder Market
    [2] Mead Johnson Entered A2 Milk Powder Market
    [3] a2 Milk Company Great China CEO Detailed China Market Strategy
    [4] Is “A2 milk”The Most Perfect One For Babies?
    [5] a2 Milk Company Expanding Offline Channels Amid Hype Doubt
    [6] a2 Milk Company Great China CEO Detailed China Market Strategy
    [7] Nestlé Introduced A2 Formula NAN To China Through Cross-Border E-commerce
    [8] Mead Johnson Entered A2 Milk Powder Market


    Share this:


    Research analyst at ChemLinked, focusing on market and regulatory updates of imported products in China, mainly covering food and cosmetics.

    COPYRIGHT: You may circulate web links to the web and contents, but they are intended for your personal, non-commercial use only. For other use of any materials, you can contact with cleditor@reach24h.com to seek consent. Find out more about our copyright policy here.
    CORRECTIONS: we do our best to provide you with accurate information. However sometimes errors slip under the radar. If you notice any errors contact us on: cleditor@reach24h.com
    Content sharing or co-authoring: just send messages to our editor team.