China Parents' Big Thirst For A New Milk

A2’s formula, from cows that produce a certain protein, is a hit among mainland moms

- Carol Matlack

Global dairy giants have reaped a windfall in China since a 2008 tainted-milk scandal sent parents scurrying to buy infant formula from foreign suppliers. Multinationals including Danone SA and Nestlé SA today control more than half the $23.4 billion Chinese market. But lately a different health concern has provided entree for a scrappy challenger from Down Under.

A2 Milk Co., with offices in Australia and New Zealand, has more than doubled its Chinese infant formula market share over the past year, to 5.6 percent. Its selling point: milk from New Zealand dairy herds that produce only a protein known as A2, which it contends is easier to digest than the blend of A1 and A2 proteins found in most European and U.S. herds. The naturally occurring protein variation stems from genetic differences among cattle breeds.

A2 “is building a passionate following from consumers,” says Jayne Hrdlicka, the U.S.-born chief executive officer. “We see a huge opportunity”—not only in China, where it sells powdered infant formula, but also in the U.S., where the company has started selling chilled fresh A2-only milk at retailers including Costco, Walmart, and Whole Foods.

Founded in 2000 by a New Zealand scientist and a wealthy dairy producer, A2 Milk started its push into China about five years ago after building a following in Australia and New Zealand and listing on stock exchanges in both countries. Its U.S. business is relatively small and unprofitable, but it’s pushing for growth, with about 8,000 stores now carrying milk that it sources from A2-only U.S. herds.