ATM-A2 MILK

[KW]

Otherwise not alot of listed activity for pet. Mainly private companies, mainly with foreign (Chinese) interest. Sector has boomed in NZ in recent years.

Here is an example..... https://www.bloomberg.com/news/articles/2021-09-20/fountainvest-agrees-to-buy-new-zealand-pet-food-firm-ziwi

Pet food is a frustrating sector.  What usually happens is a private company sets up and makes great pet food, gets a good reputation for a quality product, and then its promptly bought out by one of the big food companies who then look to cut costs and fatten margins by reducing the quality of the food as they push it from a niche product to a mass market one.  This is what happened with Blackhawk.  I currently buy Orijen, which just got bought by Mars last Nov, so I expect the same thing to happen to that brand as well    I'm looking forward to Costco opening down here as their pet food is made by Diamond which remains private and family owned, and their food is good quality. 

The other way it goes, is that a brand gets bought by private equity and then they turn it into a super premium pet food for the export market, which makes it totally unaffordable for us Kiwis, like what happened to Ziwipeak - its now $96 per kilo!   (I stopped buying it when it hit $50 a kilo, no way do my dogs get to eat better than I do lol)

[Fiordland Moose]

Pet food is a frustrating sector.  What usually happens is a private company sets up and makes great pet food, gets a good reputation for a quality product, and then its promptly bought out by one of the big food companies who then look to cut costs and fatten margins by reducing the quality of the food as they push it from a niche product to a mass market one.  This is what happened with Blackhawk.  I currently buy Orijen, which just got bought by Mars last Nov, so I expect the same thing to happen to that brand as well    I'm looking forward to Costco opening down here as their pet food is made by Diamond which remains private and family owned, and their food is good quality. 

The other way it goes, is that a brand gets bought by private equity and then they turn it into a super premium pet food for the export market, which makes it totally unaffordable for us Kiwis, like what happened to Ziwipeak - its now $96 per kilo!   (I stopped buying it when it hit $50 a kilo, now way do my dogs get to eat better than I do lol)

wonder how many of those covid dogs and cats will get replaced when they start passing away in ~8 years time (for the dogs anyway). Still some time off.

EBOS has done well in pet and made some good acquisitions.

Scales Corp's protein business has gone gangbusters and a big beneficiary of the pet boom - shame about them apples tho.

[winner (n)]

Good money in doggy daycare and grooming for a good operator

50 bucks a day for daycare and 100 bucks plus for a groom pretty lucrative

[Basil]

Oh Deer, it seems some of us older dogs have been drinking the wrong milk.  Wonder if there's such a thing as A2 Deer milk ?, maybe it there was it would be very dear, (sorry couldn't help myself).
https://www.stuff.co.nz/business/farming/131411374/drinking-deer-milk-could-have-health-benefits-scientists-suggest

[Ferg]

Oh Deer, it seems some of us older dogs have been drinking the wrong milk.  Wonder if there's such a thing as A2 Deer milk ?, maybe it there was it would be very dear, (sorry couldn't help myself).
https://www.stuff.co.nz/business/farming/131411374/drinking-deer-milk-could-have-health-benefits-scientists-suggest

$80 per litre....!  I will pass thanks.

[Left Field]

Useful update on MVM......

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/a2-aims-for-mvm-profitability

[Basil]

$80 per litre....!  I will pass thanks.

Crikey, didn't know that...makes it a pretty expensive way to build muscle mass.  Probably cheaper to simply walk your dog every day lol.

[Minimoke]

Useful update on MVM......

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/a2-aims-for-mvm-profitability

I see they are sourcing out of Synlait - did they ever announce who their "international Customer" is?

[Left Field]

Two new 'Grass fed' additions to the A2 USA fresh milk market. More shelf space. More exposure.

[Left Field]

ATM take Nestle to court over its use of a similar A2 logo..... and win.....plus costs

https://curia.europa.eu/juris/document/document.jsf?text=&docid=271017&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=2773970

(originally posted by wordplaya on HC)

Another brick in the wall..

[Breezy]

ATM take Nestle to court over its use of a similar A2 logo..... and win.....plus costs

https://curia.europa.eu/juris/document/document.jsf?text=&docid=271017&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=2773970

(originally posted by wordplaya on HC)

Another brick in the wall..

They seem to have a strong moat around their logo. I cant see the class actions gaining much traction either other than a possible token out of court settlement.

[Hectorplains]

I cant see the class actions gaining much traction either other than a possible token out of court settlement.

Can you elaborate on how you're forming that opinion?  Given the claims are of "deception" in 5 breaches of their continuous disclosure obligations, it may be that even if A2 have cover insurance, they wouldn't pay.  These class actions are far more common in Aust (hence S&G and Shine as the leads.)  It will be, at best, a prolonged and unwelcome distraction. 

[Breezy]

Can you elaborate on how you're forming that opinion?  Given the claims are of "deception" in 5 breaches of their continuous disclosure obligations, it may be that even if A2 have cover insurance, they wouldn't pay.  These class actions are far more common in Aust (hence S&G and Shine as the leads.)  It will be, at best, a prolonged and unwelcome distraction. 

A2 have a good record of defending litigation and because of Covid i think it will be a high bar for any litigation to be successful in court in this instance. I'm picking a token out of court settlement in due course at best but as you say a prolonged unwelcome distraction for some time to come meantime.

[Left Field]

So ATM has completed its share buy backs....  https://www.nzx.com/announcements/408581

Here's what Buffet says about buy backs:

"When stock can be bought below a business's value it probably is its best use of cash."

"...Berkshire will be a significant repurchaser of its shares, transactions that will take place at prices above book value but below our estimate of intrinsic value. The math of such purchases is simple: Each transaction makes per-share intrinsic value go up, while per-share book value goes down..."

"All of our major holdings enjoy excellent economics, and most use a portion of their retained earnings to repurchase their shares. We very much like that: If Charlie and I think an investee's stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire's ownership percentage."

[KW]

Bell Potter downgrades A2 Milk from Buy to Hold