Keith Woodford describes how the major global dairy companies are now reacting to the A2 milk phenomenon by climbing aboard with their own A2 products

By Keith Woodford*

A2 dairy products are now mainstreaming on a global platform. In marketing parlance, A2 is becoming an industry disruptor.

A2 dairy products are characterised by being free of A1 beta-casein.  Instead, all of the beta-casein is of the A2 type. In contrast, most milk contains a mix of A1 and A2 beta-casein, and this milk is loosely referred to as A1 milk.

It is only among cattle with European antecedents that A1 beta-casein is found. It is very common mutation in these cattle. No other mammal species, including humans, goats or sheep, produce A1 beta-casein. All can be considered A2.

The big driver of A2 industry growth is increasing acceptance of health benefits relative to A1.

Back in April I wrote about A2 dairy products shifting from a brand to a category. In that article I focused on the new players who were entering the market, including Fonterra in New Zealand, plus Nestlé and Mengniu in China. 

Since then, Nestlé now extending its A2 reach into infant formula brands in both Australia (with NAN A2) and New Zealand (with S-26 A2). 

Fonterra has also moved from a prior position of attack, first to gentle talk, and now to gentle walk, with Anchor A2 milk becoming widely available in recent weeks in supermarkets across both major islands of New Zealand. However, the Fonterra walk is indeed gentle as they traverse the tight rope between promoting A2 milk while not damaging their existing market-dominant A1 products.

In America, A2M is selling its fresh milk through more than 8000 stores, with many of the big-name supermarkets stocking it. There is good distribution in all the big-population coastal states but the reach has still to be extended across inland states.

In Australia, A2M has market leader status with its A2 fresh milk product now being number one by value. Freedom Foods has recently entered the Australian market with a UHT (non-refrigerated) milk product. Inevitably, this product will also be aimed at China.

A2 milk produced by A2M is also now widely available in the UK. Elsewhere in Europe, including Russia, niche brands of A2 are starting to emerge. A2 products are also now available in India, Korea, Singapore and elsewhere across Asia.

Among all this activity, the biggest mover has been A2M’s a2 Platinum infant formula, with the global supply produced for A2M by Synlait in New Zealand. Three years after market launch, it is already the market-leading brand in Australia with 32 percent market share.

This phenomenal growth of a2 Platinum is in the context of an overall Australia infant formula market that has itself been expanding rapidly, with the Australian market being a stepping stone to the Chinese online market.

The way this works ls is that many thousands of Australia-resident Chinese daigou (traders) purchase a2 Platinum it either wholesale or retail in Australia and then sell it online to China through their personal networks. 

For a long time, this market was considered to be a ‘grey trade’ of dubious authenticity, but it is all out in the open. Cargo planes carry the aggregated quantities up to China each day, where it is cleared by China’s customs agency. The product then fans out across China directly to the purchasing mums and dads. It is a very efficient system of logistics.

There is still only a small proportion of milk consumers across the world who understand anything about A1 beta-casein health characteristics. However, the big global dairy companies have looked out to the horizon and they have seen the future. All of them now have their A2 developmental projects, either above or below the radar.

The turning point has been the spectacular success of A2M as a company, which after more than ten years of struggling is now running big profits which have been increasing exponentially. Although A2M is still nominally a New Zealand company with joint Australian and New Zealand stock exchange listings, most of the shares are now held by investors from Australia and beyond.

I have been both observer and participant in the A2 story for 15 years. Back in 2003 when I was a professor of agribusiness at New Zealand’s Lincoln University, I became aware of the emerging science and the industry disruption that this would eventually cause.

In 2007, I wrote a book ‘Devil in the Milk’ setting out both the health issues and the industry politics and how they interacted. The big players aimed to take no prisoners and that was part of the story.

In subsequent years I also became closely linked into the research and have co-authored multiple research papers in various international journals with various medical professors.

For a long time, the mainstream industry had considerable success claiming that A2 was no more than a marketing gimmick. However, with more research becoming available that has become a harder argument to sustain. So, big companies such as Nestlé (the largest global dairy company) and Fonterra (the largest across-border trader of dairy products) recognised this was a high-risk strategy.  Much better to move across to the winning side!

In terms of scientific messaging, the big companies are still sitting back. For them, moving to A2 is a defensive measure to maintain their position in the industry.   They would still be happy if the A2 issue were to go away. As for A2M, their focus will be developing their own specific brands rather than necessarily developing the overall category. So, there will be lots of mixed messages.

In contrast, my ongoing focus is on communicating the essential science, and then letting the category development take care of itself.

The essence of the science is that A1 beta-casein releases, on digestion, a fragment called beta-casomorphin-7, written for short as BCM7. This protein fragment, as evident in the name, is a casein-derived morphine-like substance. In scientific terms it is a mu-opioid which attaches to mu-opioid receptors, of which there are many in humans and other animals.

The effects of this BCM7 are multiple. They depend on specific vulnerabilities in different people. But we know that it will always slow down the passage of food going through the intestinal system.  It messes up the normal mu-opioid receptors which control the wavelike movement of food called peristalsis. These digestive delays set the scene for digestive discomfort and exacerbate any tendencies for lactose and other carbohydrates to ferment.

We also know that BCM7 is inflammatory and that can set up all sorts of reactions in susceptible people, both in the intestines and beyond.

Professor Robert Cade from Florida – perhaps most famous as the inventor of Gatorade – established some 20 years ago that BCM7 was a respiratory depressant strongly implicated in sudden infant death syndrome in vulnerable babies. Professor Kost from Moscow showed that babies unable to quickly metabolise BCM7 were at risk of developmental delay. And for some 20 years there have been major concerns leading from Professor Elliott’s work in New Zealand that BCM7 can be a childhood trigger for Type 1 diabetes.  There is also evidence that BCM7 can cause arterial inflammation. All of this is published in top-level journals.

The challenge for farmers is that breeding for A2 takes time. It has to happen.

Disclosure of Interest: Keith Woodford consults internationally through his company AgriFood Systems Ltd for a range of dairy companies that hold diverse positions in relation to A2 milk.

*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. His articles are archived at http://keithwoodford.wordpress.com. You can contact him directly here.