Why has A2 Milk Company Ltd’s Share Price Dropped 7.8%?

A2 Milk Company Limited [ASX:A2M] share price has dropped by 7.8% today. At the time of writing shares are trading at $12.02, after closing yesterday at $13.04.

The New Zealand based company has had a fantastic run up of its share price in the last year.

Reaching a high of $13.78 earlier this month, from its price 12 months ago of $2.64 — representing a 422% increase.

Why the share price decline?

The current drop is due to international giant Nestle, introducing an infant formula using the a2beta-casein protein — the same foundation as a2 Milk’s products.

The New Zealand Herald reported that Nestle has launched its a2 product under the brand Illuma, stating that it is already on the Chinese market.

Nestle is one of the biggest food and beverage companies in the world, it’s no surprise that this has investors concerned.

What’s next for a2 Milk?

A spokesman for A2 Milk told The New Zealand Herald that it expected broader interest to emerge in the A2 Milk Industry, and that it considers itself to be well-positioned to benefit from expansion of the market.

It has been monitoring a number of companies operating in China and considers that new entrants should assist in building credibility and awareness for the A1 protein-free proposition, and hence build the overall category more quickly,’ the spokesman said.

Regards,

Dannielle Rawlings,
For Markets & Money

PS: The falls in A2 Milk Company’s shares came for a clear reason. But how well would your portfolio perform if we saw a widespread drop in the market? Markets & Money editor Vern Gowdie has found five key Aussie stocks — household names — that he believes you should sell immediately. To read why, you can find his free report ‘Five Fatal Stocks You Must Sell Now’ here.


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