The a2 Milk Company
HBS Strategy Case No. 719-424
Posted: 29 Jan 2019
Date Written: January 4, 2019
The a2 Milk Company (a2MC) became the most valuable company listed on the New Zealand stock exchange in 2018 by capitalizing on a biochemical discovery related to the protein composition of cow’s milk. Because many people find the A1 protein difficult to digest, and that protein may be related to a variety of other health problems (e.g., diabetes and heart disease), a2MC sold dairy products (milk and infant formula) containing the A2 protein only primarily in Australia and China. With sales of NZ$730 million in 2017 and a desire to grow, a2MC formed a strategic relationship with Fonterra, the world’s sixth largest dairy company, in February 2018. But one month later, Nestle, the world’s largest dairy company, confirmed that it had begun selling A2 infant formula in China and people speculated that it would start selling A2 products in Australia and New Zealand later in the year. a2MC’s retiring CEO Geoffrey Babidge and newly appointed CEO Jayne Hrdlicka must decide how to respond to Nestle’s entry and how to keep growing profitably. Can this successful entrant become a successful incumbent with a sustainable competitive advantage?
This comprehensive case was designed with four objectives in mind: 1) to illustrate the drivers of competitive advantage and the determinants of sustainability; 2) to explore various tactics firms use to enter markets (i.e., judo strategy) and the barriers that prevent incumbents from responding; 3) to assess industry and market attractiveness using Porter’s Five Forces or some other framework; and 4) to analyze strategic evolution and scope expansion over an 18-year period in an entrepreneurial firm. The setting is particularly appealing to students because it shows how technology, namely biochemistry, can be used to disrupt and revitalize a mature industry.
Keywords: Porter's Five Forces, judo strategy, market entry, disruption, innovation, barriers to response, industry attractiveness, competitive advantage, sustainability, first-mover advantage, corporate strategy, scope, value creation, biochemistry, commodity, milk, dairy, Australia, China
JEL Classification: L1, L11, L25, L66, M13
Suggested Citation: Suggested Citation