a2 Milk Company Ltd (Australia) (ASX:A2M) has signed a joint marketing deal with dairy giant Fonterra Co-operative Group (NZE:FCG) focused on its a2 Milk®.
a2 Milk comes from cows selected to naturally produce only A2 protein and no A1 protein, which makes it easy to digest.
Under the new agreement, Fonterra will build a pool of farmer-suppliers in New Zealand and Australia, which will require genetic testing to identify the A2-producing cows.
The Fonterra-sourced A2 milk, butter and cheese may be sold in Australia, the U.S., UK and Southeast Asia.
The aim is to build greater returns for both companies by growing demand locally and internationally using A2 Milk Company's increasingly popular brand strength
Sale of infant formula in Australia and China is surging
Surging sales of infant formula in Australia and China have pushed the company's first-half net profit up by 150% to $88.8 million.
Investors lapped up the news sending a2's shares soaring upwards more than 25% intra-day to $10.89.
a2 Milk is also planning to enter the New Zealand fresh milk market for the first time.
a2 holds 30% share of the Australian infant formula market
The company’s share by value of the massive infant formula market in China had grown strongly in the first half of fiscal 2018, from 3.5% at the end of June 2017 to 5.4% at the end of December.
Significantly, a2’s share of the Australian infant formula market also grew strongly, with the company now holding a 30% market share in this country.
a2’s share of fresh milk sales in Australia is now at 9.5%.