a2 milk's marketing formula for expansion in China

Three doors to china

a2 Platinum uses three main channels to sell into China: online platforms, informal buyers and Chinese mother-and-baby stores.

Chinese e-commerce platforms (or cross-border e-commerce) account for a much larger slice of the retail dollar than in Australia. “They put Australian and New Zealand-labelled products directly onto these ‘free-trade zones’, which allows Chinese consumers to buy Western brands and labels directly via a state-sanctioned e-commerce channel,” Nathan explains.

Informal buyers, or ‘daigou’, shop in Australia on behalf of someone in China. Many daigou buy for multiple consumers using WeChat.

“The daigou channel is very effective for us. By buying directly from Australian stores, they guarantee the Chinese buyer is getting the real deal and not an imitation product,” Nathan says, adding that it's also very good for Australian retail and manufacturing. “The daigou phenomenon ensures production and sales remain here.”

Nathan explains that, unlike in Australia, a2 Platinum doesn’t sell to conventional supermarkets or many pharmacies in China because they have a much smaller share of the market. “Mother-and-baby stores have no real direct equivalent in Australia but in China they're the main retail channel for products like infant formula,” he says.

Importance of quality

For middle-class Chinese, quality is more important than price and this attitude is influenced by ‘emperor syndrome’.

“In much of China you have two sets of grandparents and one set of parents funnelling money for one child,” Nathan says. “Compared to traditional Australian families, you get three or four times more in terms of the capacity to buy.”

The a2 Milk Company is proud that its products are premium priced. “It’s a brand position that resonates very well with the Chinese,” he says. “In fact, we even air freight a small amount of fresh milk into China. That's quite unique and you can imagine the cost to the consumer.” He adds that the next a2 product to launch in China is likely to be an adult powdered milk.

New frontiers

Nathan acknowledges that even the best international shipping clearly is not acceptable in the UK, Europe and the US. There, he says, you need sources of fresh milk, which is why a2 is helping establish a2 dairies: “We’re the fresh milk buyer and hopefully will be able to export the milk within their regions.”

Nathan adds that NAB has been a great partner on the journey. “The market mould we've ended up with is not the one we anticipated. We didn't rely on one very large client. Instead, once we got consumer traction, everyone came to us. NAB stuck with us through that rollercoaster of a journey.”