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Highlights
- ATM witnessed a challenging FY21.
- The Company has plans to follow a stabilise and reset strategy in FY22.
- It plans to roll out the full scale of growth and other initiatives in FY23-24 and post growth by innovation and supply chain transformation in FY25-26.
The a2 Milk Company Limited (NZX:ATM; ASX:A2M), a dairy nutrition firm based in NZ, witnessed a difficult FY21. The Company experienced an extended period of enormous uncertainty and volatility. The Company’s results had been impacted due to flat China market growth and disruption of cross-border trade amid the COVID-19 pandemic.
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The Group witnessed dramatic changes in consumer behaviour, which in turn, impacted trade customers as they tried to meet increased demand during the early phase of the pandemic and also balance off their own challenges.
ATM began to build its own inventory levels to meet any further spike in demand without facing supply chain disruptions. However, the expected demand did not materialise and resulted in increases in its own inventory. The Group had to put an aggressive measure to address excess inventory levels in 4Q21, which in turn, affected the English label infant market formula (IMF) business and other nutritional sales through daigou/reseller and e-commerce channels.
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From Q4, ATM took many initiatives to rebuild management, address excess inventory issues, increase brand investment to drive demand, start a review of its growth strategy and review alternatives to implement available capital.
ATM’s strategy to drive growth
ATM’s strategy has been designed to propel growth across multiple horizons.
The Company plans to follow a stabilise and reset strategy in FY22, where it will restore demand & supply balance, stabilise English label IMF decline, focus on new user recruitment and Stage 4 penetration, etc. This will be done through refreshing its priorities, reviewing China brand positioning and ramping up focus on innovation.
RELATED READ: The a2 Milk (NZX:ATM): What is its revamp strategy post-pandemic?
It plans to begin a full-scale rollout of growth and other initiatives in FY23-24 by increasing investment in the brand, implementing an IT roadmap, and investing further in digital marketing and e-commerce.
By FY25-26, ATM wants to deliver next-wave growth from innovation and supply chain transformation.
ATM ended the day 0.3% in red to close at $6.55.
Road ahead
ATM has the ambition to rebuild itself into a thrilling, innovative and sustainable growth company. A2 Milk has evaluated its brand positioning to keep its distinctiveness intact and obtain the full potential of its China label and English label products in key networks.
ATM has plans to innovate and expand its infant milk formula product portfolio to attract a wider set of consumers and to boost its distribution ability. It is also thinking about prospects of adjacent category growth in China, ANZ and the USA, as well as evaluating openings in new emerging markets.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)
