Issue link: http://viewer.e-digitaleditions.com/i/131994
industryfocus a2 Milk the winner to help struggling producers. "It is quite clear in the dairy industry that the actions of Coles, and other milk retailers who have followed, have forced milk processors to reduce the value of farmgate milk to unsustainable levels," he says. A survey by NSW Farmers has shown that in less than a year after the milk wars began, the discounting cost the New South Wales dairy industry about $15 million – an estimated drop in income of about $18,500 for every dairy farming business in Australia. Meanwhile, a Rabobank report says Australian farmgate prices for milk should sit between $4.50 and $5.50 per kilogram of milk solids over the next five years. Despite concerns from dairy farming groups, the Senate inquiry, and probing by the Australian Competition and Consumer Commission (ACCC), it seems discounted milk is here to stay. Now, more than ever, the Australian public will see just how resilient our farmers can be. 72 If there's one company that has benefited from the Australian supermarket milk wars, it's a2 Milk. The company has seen its market share jump by more than 30 per cent since 2011 when Coles and Woolworths dropped prices to $1 per litre for their house-brand milk products. "Our market share has risen, as we are the only brand with a real point of difference," says chief executive Peter Nathan. "Purchasers of our product are prepared to pay a premium." a2 Milk sells for $5 for two litres and $3 for one litre. Consumers are opting for the milk as a healthy choice on the back of marketing and education conducted in Australia by a2 Milk, which claims its product is healthier because it doesn't contain the A1 beta-casein protein, therefore reducing consumers' risk of heart disease, childhood diabetes and digestive problems. Other milk brands contain both A1 and A2 beta-casein proteins. a2 Milk's marketing campaign is a mix of television, radio, online advertising and print-media interviews and ads. General media coverage of the development of an A2 herd has also raised public awareness of the brand across Australia. Responding to consumer support and sales projections, the company established its first processing plant in south-west Sydney to meet growing demand. Initially, the facility will process about 10 million litres per year, with the capacity to increase if demand rises. Production in Sydney will alleviate some of the freight charges incurred by shipping milk from bottling plants in Victoria, northern NSW, Queensland and Western Australia. The $7.5-million Sydney plant features a purposebuilt food-grade factory of about 2,500 square metres, staff amenities, a laboratory, offices and car spaces; $4.5 million for the construction of the facility came from finance. The remainder was raised through the placement of ordinary shares with AMP Capital Investors and Freedom Foods Group worth $3.9 million. Freedom Foods Group now holds 26.4 per cent of the company. Figures from 2012 – a year after the milk wars began – showed that 21.6 million litres of a2 Milk was sold in Australia for the year, an increase of 32 per cent. This is estimated to be 4.2 per cent of the Australian fresh milk market. Nathan says a2 Milk continues to attract strong interest from producers wanting to supply milk, as it pays a premium over other milk companies. He says farmers have the option of having cows DNA tested and putting the proven A2 cows in one herd and then building up the numbers of that herd over time. "The benefit of having an A2 herd is only to us," he notes. "To another processor, it doesn't matter. At the moment we are meeting demand, but we are always looking for more suppliers."