The a2 Milk Company and New Zealand processor Synlait Milk have extended their supply agreement, providing a2 with a platform to continue its global growth strategy.
The companies announced the new deal on Tuesday.
It extends the five-year supply agreement for a2 Platinum and other nutritional products announced in 2018 to July 31, 2025.
The deal also provides for an increase in the volume of nutritional products over which Synlait already has exclusive supply rights; increased committed production capacity from Synlait; and pricing terms that reflect the commitment of both companies to an ongoing market-competitive pricing regime.
Synlait's chief executive officer Leon Clement said the long-term partnership had been key to both companies' success.
"Infant nutrition is a core focus for both companies as we continue to invest in our future; building capacity and capability to support our respective growth stories," he said.
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A2 managing director Jayne Hrdlicka told the company's annual general meeting in Auckland on Tuesday a2 was focused on increasing growth in China and the US.
"The growth potential of these markets for our company is significant and energising," she said.
The company now expected a better result in 2019-20, with its expected EBITDA (earnings before interest, tax, depreciation) margin to between 29 and 30 per cent.
Ms Hrdlicka said the company was looking to extend the way it sold into China.
While it performed well in the Australian reseller network, including the daigou personal shopper channel, this represented only a small part of the total market opportunity.
So a2 was planning to increase its activity in other channels, including mother and baby stores and cross-border e-commerce channels.
"The great news is that our brand is demonstrating strong potential amongst Chinese consumers," Ms Hrdlicka said.
A2's growth strategy for the US was focused on building a milk business of scale across grocery, mass merchandisers, natural, and club channels.
"We have made significant progress in penetrating and demonstrating strong consumer acceptance across all these channels to date and are encouraged by our most recent results," she said.
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Carlene Dowie
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
