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A2 Milk CEO not worried by action by US producer group

Tuesday 20th November 2018

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A2 Milk Co chief executive Jayne Hrdlicka is not concerned about a bid by the US National Milk Producers Federation to haul it over the coals for allegedly making false advertising claims there. 

Hrdlicka said she was confident A2 Milk would be successful in the US, where it has lifted its points of distribution by 50 percent in the first four months of the current financial year. 

"The science is solid. We have gone through all the appropriate steps from a regulatory standpoint, consumers love our product, retailers love our product and the traditional dairy producers are nervous so they are going to fight dirty," she said on a media call.

"All they are doing is drawing attention to the fact that there is a great proposition in the market that makes a difference for people and that consumers are excited about," she added.  

The US federation filed a complaint with the country's National Advertising Division, arguing that  "A2 milk falsely promises consumers that its product is 'easier on digestion' as compared to conventional milk and that consumers can 'avoid digestive discomfort' and will 'feel the difference,'" according to a statement. 

It alleges the research underlying A2 Milk's "claims contains errors in study design, methodology, and population selection and is unreliable and clinically insignificant."

According to the federation, NAD then referred the case to the Federal Trade Commission, when A2 Milk declined to participate in a review of its advertising claims. Radio NZ also quoted Clay Detlefsen, a senior executive at the National Milk Producers Federation, saying the case could end up in court. 

Hrdlicka said the behaviour of the traditional milk producers in the US is similar to what A2 Milk saw in Australia when it first began to establish the brand. 

"We have been there. We know how the story plays out and we know how to play for the long term," she said. 

New Zealand dairy giant Fonterra also vigorously rubbished the science behind A2 milk until February this year when it did an about-face and formed a marketing alliance with A2 Milk.

Global rival Nestle is also now selling an A2-based infant formula in China in competition with A2's Platinum brand.

Hrdlicka also said that the company is not seeing any fallout from the US-China trade tensions, despite being focused on both markets.

"We have had no issues with respect to trade wars and dynamics at any level because we just stay focused on building out our brand for the long term," she said. 

She made the comments after the company announced revenue in the four months through October rose to $368.4 million, up 40.5 percent on the same period a year ago, while earnings before interest, tax, depreciation and amortisation rose 58.5 percent to $124.2 million. Net profit was $86 million, up 64.5 percent, the company said in a trading update for its annual meeting in Melbourne. 

"We have had a great year and we are off to a strong start in FY19. We have a strong brand, special culture and unique proposition, the combination of which positions us very well for the future," said Hrdlicka.

The stock was up 2.2 percent at $10.70.

(BusinessDesk)

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