The a2 Milk Company has bought a 8.2 per cent stake in its New Zealand-based A2 infant formula supplier Synlait.
The stake was bought off-market from Dutch company Friesland Campina, making a2 Milk Synlait's second largest shareholder. Synlait's largest shareholder is Chinese-owned Bright.
The a2 Milk Company's a2 Platinum brand of infant formula is a major driver of growth for both companies in the Australian and Chinese markets, with revenues growing 62 per cent in Australia and 348 per cent in China in its recently announced half-yearly results.
Around one third of Synlait’s suppliers' herds that are 100 per cent A2, which means they supply milk that contains no A1 beta-casein.
“The investment in Synlait builds upon our existing commercial ties with an innovative dairy processing company. As Synlait’s preferred customer, this investment demonstrates a2MC’s commitment to supporting our major contractor and we see this as a long term holding,” a2 Milk's managing director Geoffrey Babidge said.
New Zealand-based dairy industry commentator Keith Woodford said the challenge for Synlait and a2 Milk would now be to move an even larger number of its farmers across to A2 milk.
“My estimate is that they will have enough A2 milk for 2017/18, but I am less confident about thereafter, given the current tsunami of demand for a2 Platinum,” he wrote in a recent blog.
