sign uplog in
Want to go ad-free? Find out how, here.

Many more A2 milk and A2 infant formula brands are now emerging across the globe but market leader The a2 milk Company is struggling

Many more A2 milk and A2 infant formula brands are now emerging across the globe but market leader The a2 milk Company is struggling

A notable change has been occurring recently with A2 milk products now available from multiple manufacturers. That includes at least three brands of A2 infant formula available here in New Zealand. These offerings are the original a2 Platinum from The a2 Milk Company (ATM), plus relative newcomers Karicare A2 from Danone and Haven A2 linked to Zuru.

There are also now at least three A2 fresh-milk brands in New Zealand, these being Fonterra, Fresha Valley, and a strangely named “organic A3” product which, according to its owners, is also produced exclusively from A2 cows.

Internationally, there are multiple A2 brands of both A2 milk and A2 infant formula now available, particularly in Asia, to a lesser extent in the Americas, but with Europe still lagging.

Most of the big international brands now have A2 projects. Including niche marketers, there are probably more than 20 brands spread across the globe.

One of the ironies is that it all started in New Zealand with the late medical scientist Professor Sir Bob Elliott in the late 1990s. He was the person who first identified the relationship across the globe between consumption of A1 beta-casein and childhood incidence of Type-1 diabetes.

Subsequently, Corran McLachlan discovered similar relationships for heart disease. The solution was to breed cows that produced the alternative A2 beta-casein.

The reason I refer to it as an irony is that the New Zealand dairy industry has never been the major beneficiary of the A2 movement. This is despite the biggest global marketer of A2 products still being New Zealand-registered ‘The a2 Milk Company’ (ATM).

Despite the New Zealand registration, most shareholders of ATM live outside New Zealand. The accounts are recorded in New Zealand dollars, and much of the ATM milk is sourced from New Zealand, but the Head Office managers are domiciled in Australia, together with key regional teams in China and the USA. To complete the international picture, the Chair is domiciled in England.

It is also ironic that going back 20 years, New Zealand had potential for a big A2 advantage over most countries. This was because, quite by chance, New Zealand had a higher proportion of A2 cows than other Western countries.

However, the mainstream industry led by Fonterra fought the A2 movement right through until 2018, seeing it as a threat rather than an opportunity. Although Fonterra now has some A2 offerings they have yet to grasp the opportunity in a significant way. Most Fonterra farmers cannot currently obtain an A2 premium and many lack insight as to where the global A2 movement is heading.

Given that ATM has recently purchased Mataura Milk, there will be new A2 opportunities for Southland and South Otago farmers. This should also increase the market value of A2 cows as farmers seek out these animals to finish the conversion process.

Some of my readers will know that I have been involved with the A2 movement for more than 15 years, both in science and outreach capacities. But most of my A2 work these days is offshore. My interest is in the category rather than particular brands, but I do work with brand owners when brand and category interests align.

Currently, I have projects in Indonesia, Japan and Russia, albeit relying on ZOOM in this COVID-afflicted world.  I also network with niche A2 marketers in other countries.

This last year has been particularly challenging for ATM. The company hit a big pothole with COVID disrupting its supply chains to China. Accordingly, ATM has fallen from being a market darling that could do no wrong to losing more than half its value in the last eight months.  A year ago, the ATM capital value was more than double that of Fonterra, but now, at only $NZ6.4 billion, it sits a little below Fonterra.

Whether COVID is the only pothole for ATM is a moot point. About five years ago the company decided to focus on its own brands rather than further developing the category. At that point, they stepped back from major research funding.

Even before that, the company was managed primarily by marketers rather than scientists, but then they pivoted even further towards marketing. I think they were dazzled by their own success. They lost sight of fundamental issues relating to the need to further build the science foundations.

Among the new A2 brands, the owners fit into two broad groups. The large-scale marketers apart from ATM have existing brands to protect based on ‘ordinary milk’ that contains A1 beta-casein. Typically, these brand owners would shed no tears if the A2 movement disappeared. The reason they have A2 projects is because they recognise the risks of not being involved. It’s all about risk management.

Then there are the niche marketers who have made a big commitment to A2. These people tend to be passionate about their products related to health matters. They have no ordinary milk brands to protect.

A consequence of this situation is that most of the big companies have no wish to fund research and the niche companies cannot afford it. Human trials are very expensive and typically for even a modest trial there is no change out of at least $US500,000 and usually much more.

Although the companies are not spending money on new science, there is an increasing level of activity from science-based organisations around the globe. I see that from my own science-based A2 publications, which had low journal citation counts initially, but now have multiple citations coming through each month via ResearchGate. Unfortunately, science-based organisations are seldom good at communicating results to the public. They leave that to others.

One of the new research papers published in recent months comes from a leading American group from Purdue University led by Professor Savaiano. This work was supported by ATM.  It confirms prior work coming mainly from China that people with a tendency to lactose intolerance can benefit from A2 milk despite A2 milk still containing lactose. Although some of us have been confident of this for quite some time, and we understand why this interaction occurs, it is particularly valuable in the public arena to have it confirmed from a top American group of researchers.

A key insight that currently has my attention is understanding why the opioid beta-casomorphin-7 (BCM7) released from A1 beta-casein can have such a wide range of effects on so many different organs of the body. The insight comes from bringing together research from the last 15 years identifying mu-opioid receptors in all of the brain, heart, lungs, bronchi, pancreas, kidneys, and liver. BCM7 latches to these receptors. Individual genetics then determines how that plays out in terms of inflammation and auto-immune responses.

Sometimes I get asked by farmers as to how long I think it will be before the A2 premium disappears. My response is that they are asking the wrong question. In the long term, the question is when will the A1 milk sell only at a discount. That situation may still be a long way distant, but it is coming.

The starting point of herd conversion is to focus on bulls classified as A2A2. It only takes one bull carrying the A1 variant of the gene to negate several years of progress.


*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. His previous articles on high-country issues are archived at https://keithwoodford.wordpress.com/category/the-high-country/. You can contact him directly here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

18 Comments

But whatever we do we cannot destroy New Zealand's proud tradition of "killing the goose that laid the golden egg".

From the price at the Stock Exchange, it seems like ATM is ripe for a takeover by an Overseas fatcat.

Probably just the intangible part, leaving the rest behind.

Key assets are the certifications and these include Synlait's manufacturing plant. Therefore if a takeover were to occur then it would be the whole company including manufacturing agreements.
KeithW

Keith, when did A2 buy the Mataura Valley Milk company, or is it now a different name, was it so recently that there hasn't been time for an updating of the Companies Register? Company records still show CCP owning over 83% of MVM. 3 out of the 5 directors are Chinese domiciled in China.
Likewise companies register shows that over 64% of A2 is owned by bank/investment banks custodial/nominees and ACC.
It will be interesting to watch what happens with A2/Mataura milk after 3yrs which is when I understand that founding shareholders can be fully paid out. I understand A2/Mataura is offering farmers 20c above Fonterra - and Fonterra doesn't have much longer in having to meet DIRA provisions, of providing 50mlitres of milk/yr to Mataura. So they may need to find replacement milk for that. So once again we see a Fonterra competitor, effectively being a Fonterra follower, but setting their base price as Fonterra's payout, rather than setting a base price of its own.
Are the majority of dairy stock a1/a1 or a1/a2?

Casual Observer
My recollection is that the settlement date for Mataura is 31 May.
I believe the name will stay the same because the ATM ownership is only 75% with 25% being owned by the Chinese partner Animal Husbandry Group.
Very roughly, the proportion of the various classes of animals will be A2A2 55%, , A1A2 40%, A1A1 5%.
This will give an A1: A2 beta-casein ratio of around 1:3. Or alternatively stated, 75% of the beta-casein will be A2.
Prospective suppliers to competitors of Fonterra tend to like the price to be stated as a premium to Fonterra's price. That system of payment minimises the risk.
KeithW

Thanks Keith. Detailed reply was appreciated.

How is Westland getting on with its A2 plans (& grass fed).

Slowly. But the Haven A2 infant formula uses Westland A2 milk.
KeithW

Accidental double submit!
KeithW

My paternal grandfather couldn't eat cooked cheese. I used to be able to but now I can't eat it either. I buy sheep's milk cheese when I can find it.

After hearing about the beta casein molecule that causes problems for quite a few people I started drinking the A2 milk. I'm betting that doing that will reduce my chances of getting early onset of some of the inflammatory diseases like diabetes.

I have also developed a gluten intolerance (last 15 years). I read somewhere that gluten molecules are similar to the beta casein molecule in A1 milk so the body/gut rejects them as well.

Wherever I go that has a high Anglo population there are more and more gluten free options in cafes and supermarkets. This is a Northern European health issue that is just going to grow. If it turns out that A1 milk is causing the gluten problem then farmers aren't going to be able to sell much of it even at a discount.

Fonterra and the farmers have been stupid about this. The risk to the NZ dairy industry of not converting all the herds to A2 milk could be very big.

Think A2 cheese. A2 yoghurt. A2 butter. A2 ice cream. Giant opportunities standing right in front of NZ farmers and NZ companies. If I could get a coffee with A2 milk I'd buy that.

The A2 milk company can't sell milk powder to the Chinese tourists going back to China because there are no Chinese tourists. Wasn't that a big part of their revenue stream? If the Chinese tourists come back so will that trade.

In the meantime I don't eat butter, ice cream, cheese made with cow's milk or yoghurt. How difficult is it really to do an A2 milk cheese to go alongside your regular cheese? If half of what I've said turns out to be true or more importantly people decide it is true then it's very risky for any company not to have an A2 product to increase production of if more and more people realise that A1 products are helping cause their dietary problems or their diabetes.

Northern Lights
Cheese contains very little lactose, so if you struggle with bovine cheese it is likely to be on account of A1 beta-casein intolerance.
BCM7 from A1 beta-casein is an opioid peptide. Similarly, gluten releases an opioid peptide. Both are inflammatory. I often suggest to friends who suffer from rheumatoid arthritis and also some other inflammatory diseases that they might like to try a diet for a month of reduced (or preferably zero) gluten and also use A2 milk rather than 'ordinary milk'. There can be no certainties but I have lots of people come back to tell me that it has made a big difference to their lives. I use such a diet myself and have now been doing so for close on ten years, and it transformed my life (both digestion and other inflammatory conditions). As we get older, we often have reduced capacity to break down the opioid peptides that cause the problems. It means replacing wheat and preferably barley in the diet with oats. Other grains are also OK. I say these things as someone who knows the science and writes science papers on these and related issues - I have one in the pipeline right now - but I am not a medical doctor. Accordingly, although over the years I have given many talks to doctors and nutritionists across a range of countries on these and related matters (for example historically to more than 6000 health care professionals in Australia, and most recently to Indonesian nutritionists by ZOOM) what I am saying is general nutritional and well-being advice and does not replace specific medical advice for individuals.
KeithW

My son has coeliac disease and struggles with a range of other autoimmune issues. We changed his diet to A2 milk in addition to dropping anything containing gluten and his life is substantially better. Currently we are on the hunt for A2 ice cream, it maybe that I need to try and make it myself as our local supermarkets in Palmerston North do not stock any.

Well I decided to buy shares in ATM yesterday. Time will tell if that was a good idea or not but it looked like a good company to me and I think it has been over sold.

ATM is curdling fast. May be they should start producing cheese ?

How does a farm that supplies Fonterra with A1 milk convert to A2?

I imagine the herd needs to be converted over a number of years?

How is the A2 milk collected and kept separate from all the other A1 milk? Like do they have separate tankers? And then a whole separate processing line at the milk factory?

davo3636,
The conversion process starts by using semen classed as A2A2.
The second stage is to test all calves and only keep those that are A2A2.
The third step is to test the cows and cull those that are not A2A2
Yes, it takes quite some years.
Most Fonterra farmers cannot currently get a premium.
Using Synlait as an example, they use separate tankers and separate silos.
Any specialist equipment has to be cleaned between moving from an A1 to an A2 operation.
KeithW

Yes, quite some years. But if it had been started when first mooted it would be done and dusted nationally by now. Lack of long term vision from LIC and Fonterra.