Nestlé gearing up to compete with a2 Milk with impending formula launch in Australia, NZ

17-Oct-2018 - Last updated on 17-Oct-2018 at 00:58 GMT

Nestlé launched its A2 infant formula as Illuma Two (Stage 3) in China in February, and is set to launch the product in Australia and New Zealand soon.

Nestlé is launching a A2 beta-casein protein infant formula product in Australia and New Zealand within the next two months, competing directly with first-mover a2 Milk.

In February, Nestlé introduced Illuma Two Stage 3, an infant formula product containing A2 beta-casein protein, to the Chinese market. According to category business head Tarun Malkani, the firm is now planning for further distribution in the country.

The formula will be launched this month in Australia as NAN A2, and will hit the shelves in November in New Zealand as S-26 Atwo; the company is also keeping its eyes peeled for other possible markets for the product.

A2 beta-casein protein is said to be similar to breastmilk beta-casein protein, the former derived from cow's milk. Approximately 30% of the global population of cows produce the A2 version of beta-casein protein.

Malkani said, "We have the DNA and gene selection technology where we can identify cows and separate the herds. The consumers have expressed an interest and we must respect consumers' interests and desires."

Competitive edge?

So far, a2 Milk — which is listed on both the Australia and New Zealand stock exchange — has enjoyed a decade as an industry leader, with a 10% share of the fresh milk market and a 32% share of the infant formula market in Australia.

The company was one of the first to promote the idea that A2 beta-casein protein is better for human health, especially for consumers who may be lactose-intolerant.

Thanks largely to its 'Platinum' infant formula brand, it also has 5% of the market share in China.

However, Nestlé’s entry into the A2 formula milk sector may well change that.

The new formula product — which falls under the company's Wyeth Nutrition brands in New Zealand and China, and Nestlé Nutrition in Australia — is sourced from several international suppliers.

a2 Milk's APAC chief executive Peter Nathan alluded to the company's strong market position, saying, "We're confident this will stand the company in good stead as the A1 protein free category continues to grow.

"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 (beta-casein) protein-free proposition."

Getting crowded

While Nestlé and a2 Milk are two of the biggest contenders in the A2 formula segment now that the former is moving into the space, other firms also want a piece of the action.

Earlier this year, Australian firm Freedom Foods announced its plans for a range of A2 milk products. In February, Fonterra revealed its strategic alliance with a2 Milk.

In August, a2 Milk reported a 68% year-on-year rise in revenue to $922.7m and 116% year-on-year rise in net profit to $195.7m for the financial year ended June 30, due mainly to a large increase infant formula sales to Australia and China.