1
00:00:04,400 --> 00:00:05,000
Speaker 1: Cura.

2
00:00:05,120 --> 00:00:07,440
Speaker 2: Welcome to Shed Lunch, brought to you by Shears's.

3
00:00:07,560 --> 00:00:08,600
Speaker 1: I'm Helen Madison.

4
00:00:09,039 --> 00:00:12,320
Speaker 2: Today we have a conversation with dairy company A two Milk,

5
00:00:12,640 --> 00:00:16,040
Speaker 2: which is riding high after a robust half year result.

6
00:00:16,600 --> 00:00:21,240
Speaker 2: I'll be talking to managing director and CEO David Berta Lucy.

7
00:00:21,640 --> 00:00:24,160
Speaker 3: When I joined, the sales and earnings of the business

8
00:00:24,160 --> 00:00:27,000
Speaker 3: we're declining rapidly. This is the first period in my

9
00:00:27,080 --> 00:00:30,200
Speaker 3: time in the last five years or ten reporting periods,

10
00:00:30,200 --> 00:00:31,760
Speaker 3: if you like, the first time the category is actually

11
00:00:31,800 --> 00:00:34,839
Speaker 3: in growth. Plant based alternatives are actually in decline in

12
00:00:34,880 --> 00:00:37,479
Speaker 3: the US, and in fact, I think we're starting to

13
00:00:37,520 --> 00:00:41,640
Speaker 3: see some consumer trends back towards whole foods and dairy

14
00:00:41,840 --> 00:00:46,280
Speaker 3: with the AOA two frape, which was incredibly successful and

15
00:00:46,360 --> 00:00:48,440
Speaker 3: sort of in a way, went viral.

16
00:00:48,520 --> 00:00:51,240
Speaker 2: Before we get started. Here's some important information.

17
00:00:52,200 --> 00:00:54,800
Speaker 4: Investing involves the risk you might lose the money you

18
00:00:54,840 --> 00:00:58,120
Speaker 4: start with. We recommend talking to a licensed financial advisor.

19
00:00:58,840 --> 00:01:02,680
Speaker 4: We also recommend reading product disclosure documents before deciding to invest.

20
00:01:02,960 --> 00:01:05,320
Speaker 4: Everything you're about to see and here is current at

21
00:01:05,319 --> 00:01:06,200
Speaker 4: the time of recording.

22
00:01:07,160 --> 00:01:09,960
Speaker 2: Welcome David. Great to have you in the studio. It's

23
00:01:10,040 --> 00:01:12,039
Speaker 2: been quite a long time. We've been hoping to have

24
00:01:12,200 --> 00:01:12,840
Speaker 2: a two milk.

25
00:01:13,120 --> 00:01:15,520
Speaker 3: Thanks Helen, thank you for having me on the program.

26
00:01:15,880 --> 00:01:19,440
Speaker 2: Now let's start with your background. You started off at

27
00:01:19,520 --> 00:01:22,520
Speaker 2: Mackenzie I think as a consultant, and then there's been

28
00:01:22,640 --> 00:01:25,720
Speaker 2: various other companies you work for, some of them FMCG,

29
00:01:26,720 --> 00:01:30,480
Speaker 2: I think specific brands. Foster is even what is it

30
00:01:30,520 --> 00:01:34,039
Speaker 2: that excites you about now A two milk or a

31
00:01:34,120 --> 00:01:34,760
Speaker 2: milk brand?

32
00:01:35,360 --> 00:01:37,000
Speaker 3: Well, first of all, I was a loyal a to

33
00:01:37,280 --> 00:01:39,199
Speaker 3: milk drinker and dairy lover, so I had a natural

34
00:01:39,240 --> 00:01:43,800
Speaker 3: affinity to the company and the category. But when I

35
00:01:43,840 --> 00:01:46,399
Speaker 3: went through the process to join a too or a

36
00:01:46,400 --> 00:01:50,040
Speaker 3: few things that were particularly interesting to me. I think

37
00:01:50,080 --> 00:01:54,040
Speaker 3: the whole a two proposition. You know, milk that's naturally

38
00:01:54,080 --> 00:01:56,600
Speaker 3: a one protein free and the functional benefits associated with

39
00:01:56,640 --> 00:01:59,240
Speaker 3: that around digestion and other potential health benefits. I thought

40
00:01:59,240 --> 00:02:04,000
Speaker 3: that was really interesting differentiation and what is often regarded

41
00:02:04,040 --> 00:02:07,560
Speaker 3: as a straightforward product, but it really is quite a

42
00:02:07,560 --> 00:02:12,000
Speaker 3: super food milk in many ways. Secondly, the brand that

43
00:02:12,160 --> 00:02:14,040
Speaker 3: the company had developed over the years, you know the

44
00:02:14,080 --> 00:02:17,520
Speaker 3: people before me and our team, and we've taken it

45
00:02:17,520 --> 00:02:21,799
Speaker 3: to another level as well. But a wonderful premium or

46
00:02:21,880 --> 00:02:24,720
Speaker 3: ultra premium brand that has really strong equity and loyalty

47
00:02:24,720 --> 00:02:27,320
Speaker 3: amongst its consumers, and I thought that had great potential.

48
00:02:27,360 --> 00:02:30,720
Speaker 3: And then just more broadly, the business growth potential I

49
00:02:30,720 --> 00:02:35,480
Speaker 3: think of a two at the time developed really quickly,

50
00:02:36,480 --> 00:02:38,960
Speaker 3: particularly into the infant milk formula category and into China,

51
00:02:39,040 --> 00:02:42,320
Speaker 3: but within Australia and New Zealand, the US, China and

52
00:02:42,360 --> 00:02:44,440
Speaker 3: other emerging markets. I saw a lot of potential in

53
00:02:44,520 --> 00:02:46,720
Speaker 3: infant other nutritionals and in the liquid milk part of

54
00:02:46,760 --> 00:02:49,680
Speaker 3: the business as well. So it was a pretty exciting opportunity.

55
00:02:49,760 --> 00:02:52,120
Speaker 3: It remains that way as well.

56
00:02:52,200 --> 00:02:56,079
Speaker 2: Yeah, now that was more than five years ago. You've

57
00:02:56,080 --> 00:02:58,680
Speaker 2: been at the Helm five years. But it hasn't always

58
00:02:58,720 --> 00:03:02,880
Speaker 2: been easy, I must admit. When you actually agreed to

59
00:03:02,919 --> 00:03:04,520
Speaker 2: take it on, and I think the year price was

60
00:03:04,600 --> 00:03:07,760
Speaker 2: in those heaty heights of twenty dollars or so, it

61
00:03:07,840 --> 00:03:10,240
Speaker 2: did quickly come right down and there were a number

62
00:03:10,240 --> 00:03:12,800
Speaker 2: of issues like COVID obviously hit the company pretty hard.

63
00:03:13,080 --> 00:03:15,680
Speaker 2: By the time you did take up the Holm, things

64
00:03:15,680 --> 00:03:18,600
Speaker 2: were a little different. So how has it been in

65
00:03:18,639 --> 00:03:20,919
Speaker 2: that time with the ups and downs for you?

66
00:03:22,680 --> 00:03:24,639
Speaker 3: Yeah, you're right. If I go back then when I

67
00:03:24,639 --> 00:03:27,240
Speaker 3: actually signed up to join the company, it was pre

68
00:03:27,360 --> 00:03:30,680
Speaker 3: Covid and the business was like it was flying at

69
00:03:30,720 --> 00:03:34,080
Speaker 3: the time, really, but by the time I joined, the

70
00:03:34,200 --> 00:03:36,840
Speaker 3: sort of delayed impacts of Covid on the business were

71
00:03:36,880 --> 00:03:39,920
Speaker 3: quite disruptive, and that's well reported. When I joined, the

72
00:03:40,400 --> 00:03:43,480
Speaker 3: sales and earnings of the business were declining rapidly. So

73
00:03:43,680 --> 00:03:46,960
Speaker 3: the first task was to stabilize the business and refresh

74
00:03:47,040 --> 00:03:50,400
Speaker 3: our growth strategy, gradually renew the leadership team, and go

75
00:03:50,440 --> 00:03:53,600
Speaker 3: about executing our plan over time. And there was a

76
00:03:53,680 --> 00:03:56,960
Speaker 3: challenging start, and then we had a lot of foundational

77
00:03:57,000 --> 00:03:59,880
Speaker 3: work to do during the middle periods of my time,

78
00:04:00,320 --> 00:04:02,360
Speaker 3: when when we started to invest in growth and we

79
00:04:02,400 --> 00:04:05,120
Speaker 3: doubled our brand investment, we ramped up our innovation, we

80
00:04:05,160 --> 00:04:07,480
Speaker 3: started to enter new markets. And it's really pleasing now

81
00:04:07,520 --> 00:04:09,800
Speaker 3: to see some of that growth coming through now and

82
00:04:09,840 --> 00:04:12,480
Speaker 3: improvement in earnings and share price on the back of

83
00:04:12,480 --> 00:04:14,240
Speaker 3: that for our shareholders that have stuck with us over

84
00:04:14,280 --> 00:04:16,560
Speaker 3: that period as well. So it's yeah, it's been quite

85
00:04:16,560 --> 00:04:21,280
Speaker 3: a journey, but it's yeah, it's been satisfying. I've loved it.

86
00:04:21,279 --> 00:04:23,719
Speaker 3: It's been a real privilege to be leading the company.

87
00:04:23,760 --> 00:04:26,719
Speaker 2: Yeah, and I'm assuming five years. You're not leaving now,

88
00:04:26,760 --> 00:04:28,080
Speaker 2: that there could be another five years in.

89
00:04:28,160 --> 00:04:31,040
Speaker 3: You Well, I don't know about another five year. It's

90
00:04:31,120 --> 00:04:33,719
Speaker 3: quite a demanding role. But no, I look, I'm more

91
00:04:33,800 --> 00:04:35,799
Speaker 3: likely to retire from my role than to be seeking

92
00:04:35,839 --> 00:04:38,320
Speaker 3: other opportunities. I do love the atmil company.

93
00:04:38,360 --> 00:04:43,559
Speaker 2: Yeah, David, let's unpeck the market for a two milk,

94
00:04:43,720 --> 00:04:47,960
Speaker 2: particularly the infant formula one in China. What's happening in

95
00:04:48,040 --> 00:04:49,719
Speaker 2: terms of trends and demand.

96
00:04:51,160 --> 00:04:53,520
Speaker 3: Well, first fall, let me just put the China infant

97
00:04:53,520 --> 00:04:58,080
Speaker 3: milk marketing context like it is the world's largest infant

98
00:04:58,080 --> 00:05:00,920
Speaker 3: milk formula market by a lot way. Like it's probably

99
00:05:01,000 --> 00:05:02,919
Speaker 3: depending on how you measured, it's something like forty percent

100
00:05:02,960 --> 00:05:06,120
Speaker 3: plus of the global infant milk formula market. And not

101
00:05:06,160 --> 00:05:08,680
Speaker 3: only is it the driven by the number of newborns,

102
00:05:08,720 --> 00:05:11,040
Speaker 3: but also the duration of use because they use infant

103
00:05:11,040 --> 00:05:13,640
Speaker 3: and toddler milk and other kids nutrition products for over

104
00:05:13,680 --> 00:05:17,480
Speaker 3: an extended period of three, four, even five years. So

105
00:05:17,520 --> 00:05:19,880
Speaker 3: the trends that we're seeing for demographic reasons, I mean,

106
00:05:19,920 --> 00:05:22,159
Speaker 3: I think think it's well reported that the number of

107
00:05:22,200 --> 00:05:25,559
Speaker 3: newborns in China has declined over time, and that dates

108
00:05:25,560 --> 00:05:28,360
Speaker 3: back some time to the demographic effects of the one

109
00:05:28,440 --> 00:05:33,280
Speaker 3: child policies, and what we're seeing is that there's been

110
00:05:33,279 --> 00:05:36,000
Speaker 3: a decline in the market value over some time. I've

111
00:05:36,000 --> 00:05:37,960
Speaker 3: actually seen that sort of stabilized, and this is the

112
00:05:37,960 --> 00:05:41,200
Speaker 3: first period in my time at A two in the

113
00:05:41,279 --> 00:05:44,200
Speaker 3: last five years or ten reporting periods, if you like,

114
00:05:44,240 --> 00:05:46,360
Speaker 3: the first time the category is actually in growth, which

115
00:05:46,400 --> 00:05:50,600
Speaker 3: is terrific. It's only in three percent growth. But we've

116
00:05:50,600 --> 00:05:55,520
Speaker 3: had a much more challenging backdrop until recently, and we're

117
00:05:55,520 --> 00:05:57,839
Speaker 3: seeing that there's a number of different things happening. So

118
00:05:57,880 --> 00:06:00,680
Speaker 3: volume has been down, There's been a degree of premimization

119
00:06:00,800 --> 00:06:04,200
Speaker 3: and innovation in the category, which is supporting growth. There's

120
00:06:04,200 --> 00:06:08,880
Speaker 3: a shift towards online, so the retail channel has been

121
00:06:09,240 --> 00:06:11,760
Speaker 3: under pressure for some time with a number of door closures.

122
00:06:12,040 --> 00:06:14,120
Speaker 3: So for us, our business is almost like is over

123
00:06:14,200 --> 00:06:16,560
Speaker 3: half of it is e commerce or e commace based now.

124
00:06:17,360 --> 00:06:19,159
Speaker 3: And then from a segment point of view, the A

125
00:06:19,240 --> 00:06:22,080
Speaker 3: two protein segment has been growing quite rapidly, and.

126
00:06:22,400 --> 00:06:25,680
Speaker 2: Obviously people are actually understanding, you know, the sort of

127
00:06:25,680 --> 00:06:28,440
Speaker 2: the perceived qualities of A two milk two.

128
00:06:28,400 --> 00:06:30,200
Speaker 3: And we've been leaning into that a little bit more

129
00:06:30,200 --> 00:06:33,880
Speaker 3: in our communications over time in terms of communicating the

130
00:06:33,880 --> 00:06:38,120
Speaker 3: benefits of that, which is essentially that the protein, the

131
00:06:38,120 --> 00:06:41,520
Speaker 3: bitka sine protein, which is a one type, has a

132
00:06:41,560 --> 00:06:44,200
Speaker 3: different impact on the body and can cause information and

133
00:06:44,279 --> 00:06:46,920
Speaker 3: digestion and other issues associated with that, and so there

134
00:06:46,920 --> 00:06:49,760
Speaker 3: are other potential health benefits that we're exploring through our

135
00:06:49,760 --> 00:06:52,039
Speaker 3: science program as well. So we've leant more into that.

136
00:06:52,120 --> 00:06:56,520
Speaker 3: And obviously for the for the Chinese, they're more more

137
00:06:56,560 --> 00:07:02,240
Speaker 3: susceptible to milk intolerance and particularly infants relative to people

138
00:07:02,279 --> 00:07:04,880
Speaker 3: from ains that or other Western countries as well, which

139
00:07:04,880 --> 00:07:06,040
Speaker 3: are more milk tolerant.

140
00:07:06,440 --> 00:07:10,480
Speaker 2: Speaking of marketing, I see that for the Year of

141
00:07:10,480 --> 00:07:14,000
Speaker 2: the Horse in China you had a collaboration with My

142
00:07:14,080 --> 00:07:18,320
Speaker 2: Little Pony, which is pretty interesting. And then obviously just

143
00:07:18,400 --> 00:07:22,120
Speaker 2: recently the Australian Open the Tennis you were the only

144
00:07:22,320 --> 00:07:23,320
Speaker 2: dairy supplier there.

145
00:07:23,720 --> 00:07:26,200
Speaker 3: Yeah, both have been very successful. So My Little Pony

146
00:07:26,280 --> 00:07:29,040
Speaker 3: is as you point out, with the Year of the Horse,

147
00:07:29,080 --> 00:07:31,960
Speaker 3: I mean, very very close affinity and very topical with that.

148
00:07:32,320 --> 00:07:35,480
Speaker 3: It was you know, we competed with others to get that.

149
00:07:35,840 --> 00:07:40,920
Speaker 3: Then the owner of that particular ip or asset they

150
00:07:40,920 --> 00:07:43,400
Speaker 3: selected a two to partner with on the basis of

151
00:07:43,400 --> 00:07:46,000
Speaker 3: our premium brand positioning and the plan that we put

152
00:07:46,000 --> 00:07:48,200
Speaker 3: in place, and it's been incredibly successful. It's just launched

153
00:07:48,240 --> 00:07:52,640
Speaker 3: in mid December. But say, for example, just one sort

154
00:07:52,680 --> 00:07:55,160
Speaker 3: of measure of that, if you look at Little Red

155
00:07:55,160 --> 00:07:57,880
Speaker 3: Book over there, which is a platform for consumers to

156
00:07:58,720 --> 00:08:01,320
Speaker 3: provide reviews and engage on different topics, particularly for the

157
00:08:02,480 --> 00:08:04,520
Speaker 3: in relation to the baby category, which it's probably the

158
00:08:04,600 --> 00:08:06,800
Speaker 3: number one kind of research area for consumers, and we've

159
00:08:06,840 --> 00:08:11,040
Speaker 3: gone from number nine in terms of the searches for

160
00:08:11,160 --> 00:08:14,480
Speaker 3: infant milk formula for new babies, we've gone to number one.

161
00:08:15,080 --> 00:08:17,800
Speaker 3: And the AO, the AO partnership there were the first

162
00:08:18,000 --> 00:08:20,520
Speaker 3: dairy milk partner of the Australian Open and it's one

163
00:08:20,560 --> 00:08:24,600
Speaker 3: hundred and twenty year history. Delighted to be part of it.

164
00:08:25,160 --> 00:08:27,080
Speaker 3: And you know when we thought about it and worked

165
00:08:27,120 --> 00:08:30,200
Speaker 3: with AO and like it became, it was always going

166
00:08:30,240 --> 00:08:32,840
Speaker 3: to be interesting from an Australian dimensioned just in just

167
00:08:32,840 --> 00:08:36,600
Speaker 3: because it's a premium it's our most premium international sporting

168
00:08:36,600 --> 00:08:40,040
Speaker 3: event in Australia and we're the most premium milk brand

169
00:08:40,080 --> 00:08:42,520
Speaker 3: and we share values around health and well being and

170
00:08:43,240 --> 00:08:46,120
Speaker 3: things like that, so it sort of made sense, But

171
00:08:46,160 --> 00:08:49,079
Speaker 3: what was really interesting was how relevant it was to

172
00:08:49,200 --> 00:08:51,599
Speaker 3: China as well. So I was actually surprised about the

173
00:08:51,679 --> 00:08:53,560
Speaker 3: level of when we dug into it. More the level

174
00:08:53,559 --> 00:08:57,520
Speaker 3: of participation and interest in tennis in Australia and the

175
00:08:57,600 --> 00:09:01,600
Speaker 3: viewership of the AO is huge. It's almost like, I

176
00:09:01,600 --> 00:09:04,439
Speaker 3: think it's like forty percent of the international viewership by

177
00:09:04,559 --> 00:09:07,360
Speaker 3: by ours or out of China of the AO. And

178
00:09:07,559 --> 00:09:09,880
Speaker 3: in the venue, you know, we had we had all

179
00:09:09,920 --> 00:09:12,320
Speaker 3: the obviously the milk porridge and usage rights there, so

180
00:09:12,400 --> 00:09:15,600
Speaker 3: all the fourteen cafes were using A two A two milk,

181
00:09:16,000 --> 00:09:17,839
Speaker 3: all the coffee cups if you remember seeing those, or

182
00:09:17,920 --> 00:09:22,000
Speaker 3: A two branded with the with the AO A two frape,

183
00:09:22,559 --> 00:09:24,920
Speaker 3: which was incredibly successful in it and sort of in

184
00:09:24,960 --> 00:09:27,080
Speaker 3: a way it went viral because you know, people love

185
00:09:27,160 --> 00:09:29,080
Speaker 3: taking selfies of themselves and that's it was a great

186
00:09:29,120 --> 00:09:31,720
Speaker 3: sort of symbol of the AO at the time and

187
00:09:31,800 --> 00:09:34,160
Speaker 3: got picked up and amplified around the world. And also

188
00:09:34,200 --> 00:09:35,920
Speaker 3: from a trade point of view, gave us the opportunity

189
00:09:36,000 --> 00:09:39,880
Speaker 3: to you know, to reward some of our our customers

190
00:09:39,880 --> 00:09:43,280
Speaker 3: and distributors and strategic partners and that and bring them down,

191
00:09:43,280 --> 00:09:46,040
Speaker 3: to bring them down from China for the event, so

192
00:09:46,080 --> 00:09:48,800
Speaker 3: incredibly successful and there was lots of it was referred

193
00:09:48,840 --> 00:09:51,920
Speaker 3: to as KOLs in China or influences that were at

194
00:09:51,960 --> 00:09:56,040
Speaker 3: the open and amplifying the brand. So yeah, really fantastic partnership,

195
00:09:56,240 --> 00:09:58,840
Speaker 3: really well executed. You know, we've we've signed up to

196
00:09:58,880 --> 00:10:01,160
Speaker 3: a sort of a medium term with the AO and

197
00:10:01,200 --> 00:10:03,280
Speaker 3: look forward to continuing and developing that partnership.

198
00:10:03,520 --> 00:10:06,840
Speaker 1: So we could see you there another year next year.

199
00:10:07,120 --> 00:10:11,960
Speaker 3: Yeah, so we've got rights over the next four years. Yeah, yeah, yeah,

200
00:10:12,000 --> 00:10:13,800
Speaker 3: so it's really really exciting.

201
00:10:13,800 --> 00:10:17,640
Speaker 2: Actually, yeah, David, we look at the breakdown of the market.

202
00:10:17,679 --> 00:10:20,000
Speaker 2: I mean at the moment, is it's still that China

203
00:10:20,160 --> 00:10:23,800
Speaker 2: is the lines share and infant formula as the product

204
00:10:23,880 --> 00:10:25,240
Speaker 2: is the main.

205
00:10:25,200 --> 00:10:26,200
Speaker 1: Call for the business.

206
00:10:26,800 --> 00:10:29,559
Speaker 3: Yeah. So if you think from a category or product

207
00:10:29,559 --> 00:10:32,760
Speaker 3: point of view, about seventy percent of our business is

208
00:10:32,760 --> 00:10:36,960
Speaker 3: from the infant nutrition part of our business. About the

209
00:10:36,960 --> 00:10:40,480
Speaker 3: next biggest category is liquid milk in Australia and the

210
00:10:40,840 --> 00:10:43,960
Speaker 3: US it's about twenty percent. These are rough numbers, and

211
00:10:44,000 --> 00:10:45,960
Speaker 3: ten percent of our business is what we refer to

212
00:10:46,000 --> 00:10:49,880
Speaker 3: as other nutritionals, right okay, And then from a geographic

213
00:10:49,960 --> 00:10:53,199
Speaker 3: point of view, another way to another lens to look

214
00:10:53,200 --> 00:10:56,920
Speaker 3: at it, it's about seventy five percent is China and

215
00:10:56,960 --> 00:10:59,280
Speaker 3: other Asia, with the vast majority being in China rather

216
00:10:59,360 --> 00:11:04,320
Speaker 3: than the other Asia markets just under fifteen percent or

217
00:11:04,360 --> 00:11:09,160
Speaker 3: just over fifteen percent sorries in Australia and just under

218
00:11:09,240 --> 00:11:10,440
Speaker 3: ten percent in the US.

219
00:11:10,760 --> 00:11:13,439
Speaker 2: A lot of other developed countries are thinking about plant milk.

220
00:11:13,520 --> 00:11:15,480
Speaker 2: Is that something that you would either consider or you're

221
00:11:15,600 --> 00:11:17,359
Speaker 2: going to stick to unitting at the stage.

222
00:11:17,880 --> 00:11:19,880
Speaker 3: So from our point of view, like we're very much

223
00:11:19,880 --> 00:11:24,360
Speaker 3: focused on cow's milk or bovine milk that's naturally a

224
00:11:24,480 --> 00:11:27,120
Speaker 3: one protein free That's what our whole purpose is all

225
00:11:27,160 --> 00:11:29,200
Speaker 3: about in pioneer in the future of dairy for good.

226
00:11:29,240 --> 00:11:32,440
Speaker 3: So that's that's our kind of core focus. It's not

227
00:11:32,480 --> 00:11:34,960
Speaker 3: to say that we'd never do any plant based products,

228
00:11:34,960 --> 00:11:36,959
Speaker 3: it's just not a focus of our just one bit

229
00:11:37,000 --> 00:11:39,720
Speaker 3: of context of the plant based alternatives. It's still I

230
00:11:39,800 --> 00:11:44,240
Speaker 3: know it's it has become quite popular over the years,

231
00:11:44,240 --> 00:11:46,719
Speaker 3: but it's still only about ten to fifteen percent of

232
00:11:46,760 --> 00:11:51,680
Speaker 3: the of the category overall in Australia, New Zealand, the

233
00:11:51,800 --> 00:11:54,480
Speaker 3: US and even China as well. And in fact, I

234
00:11:54,520 --> 00:11:58,480
Speaker 3: think we're starting to see some consumer trends back towards

235
00:11:58,720 --> 00:12:01,200
Speaker 3: whole foods and dairy like in the US, for example,

236
00:12:01,240 --> 00:12:04,200
Speaker 3: And I know it can be a little bit controversial

237
00:12:04,200 --> 00:12:06,400
Speaker 3: in the US, but the Maha movement I think that's

238
00:12:06,440 --> 00:12:08,240
Speaker 3: been a catalyst behind it as well. But there's definitely

239
00:12:08,240 --> 00:12:11,679
Speaker 3: consumer trend towards it, where plant based alternatives are actually

240
00:12:11,679 --> 00:12:14,240
Speaker 3: in decline in the US and areas back in growth,

241
00:12:14,400 --> 00:12:16,440
Speaker 3: which is great. And the specialty category that we're in,

242
00:12:16,480 --> 00:12:18,600
Speaker 3: the more premium aspect, is in double digit growth, which

243
00:12:18,640 --> 00:12:19,760
Speaker 3: is fantastic.

244
00:12:19,520 --> 00:12:22,280
Speaker 2: Yes, because I think you're looking at to be profitable

245
00:12:22,320 --> 00:12:24,600
Speaker 2: in the US and twenty twenty six now.

246
00:12:24,640 --> 00:12:26,559
Speaker 3: We've invested a lot in the US over the years.

247
00:12:26,880 --> 00:12:29,000
Speaker 3: Well before my time the company entered the market back

248
00:12:29,000 --> 00:12:32,880
Speaker 3: in twenty fifteen, I think it was heavy investment in

249
00:12:33,240 --> 00:12:36,760
Speaker 3: brand development and positioning and distribution, etc. By the time

250
00:12:36,800 --> 00:12:39,160
Speaker 3: I joined, we were losing over thirty million dollars a year,

251
00:12:39,960 --> 00:12:42,800
Speaker 3: and this year we're close to break even and we've

252
00:12:43,080 --> 00:12:44,720
Speaker 3: declared to the market that we intend to be break

253
00:12:44,760 --> 00:12:47,360
Speaker 3: even in FI twenty seven. So it's come a long way,

254
00:12:48,240 --> 00:12:50,640
Speaker 3: and I think there's more opportunity in liquid milk and

255
00:12:50,679 --> 00:12:53,680
Speaker 3: innovation around that We're growing rapidly reported sales growth in

256
00:12:53,720 --> 00:12:56,400
Speaker 3: the HAALF of twenty nine percent. In the US, there's

257
00:12:56,440 --> 00:12:58,920
Speaker 3: sort of more uncertain but potentially bigger opportunity for US,

258
00:12:58,960 --> 00:13:01,520
Speaker 3: as in the infant milk category where we're currently going

259
00:13:01,559 --> 00:13:04,720
Speaker 3: through FDO approval to bring our product into the US market.

260
00:13:04,920 --> 00:13:07,280
Speaker 2: So you HEAVYPDEO for their liquid milk for the adult

261
00:13:07,320 --> 00:13:07,680
Speaker 2: milk if you.

262
00:13:07,760 --> 00:13:11,640
Speaker 3: Live, yeah, it's a more straightforward process to be manufacturing

263
00:13:12,000 --> 00:13:16,080
Speaker 3: liquid milk locally for the market, but the infant milk forma,

264
00:13:16,320 --> 00:13:19,480
Speaker 3: for very good reasons, is quite a it's a much

265
00:13:19,520 --> 00:13:20,760
Speaker 3: bigger process to go through.

266
00:13:21,400 --> 00:13:24,959
Speaker 1: Let's jump to the half year results.

267
00:13:25,559 --> 00:13:28,320
Speaker 2: Fairly robust from what everyone has been saying in the

268
00:13:28,360 --> 00:13:32,360
Speaker 2: market this year, price had a bit of a jump

269
00:13:32,440 --> 00:13:35,160
Speaker 2: up between five and ten percent on both I think

270
00:13:35,200 --> 00:13:36,959
Speaker 2: the AX and the NZX.

271
00:13:37,360 --> 00:13:38,400
Speaker 1: I think a lot of it.

272
00:13:38,360 --> 00:13:41,040
Speaker 2: Was probably about your forecast, the fact that you are

273
00:13:41,520 --> 00:13:45,360
Speaker 2: thinking you will get to that two billion revenue target,

274
00:13:45,360 --> 00:13:47,600
Speaker 2: which has been something you've been looking at for some time.

275
00:13:48,200 --> 00:13:50,200
Speaker 2: But in terms of the earnings and the revenue, can

276
00:13:50,200 --> 00:13:54,000
Speaker 2: you talk us through what underpins that confidence now?

277
00:13:55,679 --> 00:13:58,800
Speaker 3: Well, we're in a very fortunate position at the moment

278
00:13:58,840 --> 00:14:01,520
Speaker 3: that all parts of our since they're actually really performing well.

279
00:14:01,960 --> 00:14:03,800
Speaker 3: Whether I look at it from a category point of view,

280
00:14:03,840 --> 00:14:06,400
Speaker 3: Infant formula, the Quid Milk, are the nutritionals or from

281
00:14:06,440 --> 00:14:09,880
Speaker 3: a market point of view, China, Australia and New Zealand,

282
00:14:09,920 --> 00:14:14,200
Speaker 3: the US all growing really strongly, like all of our

283
00:14:14,240 --> 00:14:16,560
Speaker 3: categories are in double digit growth. The brand is in

284
00:14:16,600 --> 00:14:20,040
Speaker 3: great health. You know, we're executing really well across the business.

285
00:14:19,680 --> 00:14:22,880
Speaker 3: We've brought innovation to market that's really having an impact

286
00:14:22,880 --> 00:14:24,680
Speaker 3: even in the period, and products that weren't there in

287
00:14:24,720 --> 00:14:27,000
Speaker 3: the comparable period are starting to have an impact as well.

288
00:14:27,080 --> 00:14:30,040
Speaker 3: So we've got really good momentum behind our business. We're

289
00:14:30,080 --> 00:14:35,240
Speaker 3: reported close to nineteen percent growth in sales. Eber Da

290
00:14:35,320 --> 00:14:37,200
Speaker 3: was a similar level of growth, but if you look

291
00:14:37,200 --> 00:14:39,000
Speaker 3: at on an underlying basis, and we can come back

292
00:14:39,040 --> 00:14:40,560
Speaker 3: to this, but it's got to do with our acquisition

293
00:14:40,600 --> 00:14:42,760
Speaker 3: of the Pocono facility last year. If you back out

294
00:14:42,760 --> 00:14:45,880
Speaker 3: those temporary losses, our eber Dar would have been up

295
00:14:45,880 --> 00:14:49,120
Speaker 3: twenty six percent, EPs would have been up nineteen percent.

296
00:14:49,240 --> 00:14:52,640
Speaker 3: So really strong reported result. But you know, as always

297
00:14:52,640 --> 00:14:54,560
Speaker 3: in the market's all about the future rather than the past.

298
00:14:54,560 --> 00:14:57,080
Speaker 3: And at the same time we're obal to upgrade our

299
00:14:57,760 --> 00:15:01,000
Speaker 3: sales forecast for guidance for the year from low double

300
00:15:01,040 --> 00:15:05,080
Speaker 3: digit growth to mid double digit growth, and also to

301
00:15:06,280 --> 00:15:09,920
Speaker 3: adjust the range of EBIT margin or profitability outcomes and

302
00:15:09,960 --> 00:15:11,280
Speaker 3: push that up a little bit as well, to the

303
00:15:11,320 --> 00:15:13,400
Speaker 3: higher end of our prior range. You talked about that

304
00:15:13,440 --> 00:15:16,120
Speaker 3: two billion dollar sales target. So we've come from one

305
00:15:16,120 --> 00:15:18,960
Speaker 3: point two billion dollars of sales in f y twenty

306
00:15:19,000 --> 00:15:22,200
Speaker 3: one to be on target now to report over two

307
00:15:22,200 --> 00:15:25,600
Speaker 3: billion dollars of sales over that five year period, which

308
00:15:25,680 --> 00:15:28,640
Speaker 3: is a compound growth rate of just over ten percent,

309
00:15:28,680 --> 00:15:31,920
Speaker 3: which is terrific. And we've improved our margins by almost

310
00:15:31,920 --> 00:15:34,920
Speaker 3: five percentage points, which is fantastic, very satisfying.

311
00:15:35,800 --> 00:15:37,960
Speaker 2: If we look at the potential and as you say,

312
00:15:38,000 --> 00:15:43,120
Speaker 2: all that underlying earnings growth that's there, is that reflected

313
00:15:43,160 --> 00:15:45,840
Speaker 2: in the share price. I mean it hasn't. It's sort

314
00:15:45,840 --> 00:15:48,080
Speaker 2: of come up with this last result, but it goes

315
00:15:48,160 --> 00:15:50,640
Speaker 2: up and down. I mean, it can just be released

316
00:15:50,640 --> 00:15:55,239
Speaker 2: for figures about China's booth rate and it takes another slide.

317
00:15:56,080 --> 00:15:59,240
Speaker 3: Yeah, I think. I mean our share price, I mean,

318
00:15:59,760 --> 00:16:01,640
Speaker 3: it's not for me to judge whether it's an appropriate

319
00:16:01,720 --> 00:16:03,720
Speaker 3: share price, but it has been volatile, I think, is

320
00:16:03,760 --> 00:16:08,320
Speaker 3: your point. And yes, it does respond to some macro

321
00:16:08,480 --> 00:16:11,320
Speaker 3: data from time to time. Anything about because of China

322
00:16:11,400 --> 00:16:13,160
Speaker 3: is so important to us in the infant category, so

323
00:16:13,200 --> 00:16:15,080
Speaker 3: it doesn't take much to move it around. The recent

324
00:16:15,160 --> 00:16:18,680
Speaker 3: newborns number was an example of that. But then behind

325
00:16:18,680 --> 00:16:21,280
Speaker 3: those newborn's number, I don't think, you know, the market

326
00:16:21,320 --> 00:16:23,520
Speaker 3: fully appreciated until we talk to them about you know,

327
00:16:23,600 --> 00:16:27,520
Speaker 3: the actual breast feeding rates have declined, there's prolonged usage

328
00:16:27,520 --> 00:16:30,960
Speaker 3: and penetration of infant milk, formula use in early stages,

329
00:16:30,960 --> 00:16:33,800
Speaker 3: et cetera. So there's a number of other factors. It's

330
00:16:33,840 --> 00:16:36,800
Speaker 3: quite a nuanced market to kind of fully understand. But

331
00:16:37,360 --> 00:16:39,920
Speaker 3: in terms of the share price, I think, over my time,

332
00:16:39,960 --> 00:16:42,920
Speaker 3: I think those COVID impacts to start with, you know,

333
00:16:42,920 --> 00:16:44,840
Speaker 3: it took a little while for that for the stock

334
00:16:44,880 --> 00:16:47,280
Speaker 3: price to really bottom out, and in response of all that,

335
00:16:47,320 --> 00:16:49,600
Speaker 3: and then we've been doing some hard work in laying

336
00:16:49,600 --> 00:16:51,840
Speaker 3: down the foundations for growth. But more recently, like over

337
00:16:51,880 --> 00:16:54,120
Speaker 3: the last over the last two years, you know, the

338
00:16:54,200 --> 00:16:57,560
Speaker 3: stock prices is up over seventy percent. In the last year,

339
00:16:57,600 --> 00:17:00,440
Speaker 3: it's up over thirty percent. So it's great, you know,

340
00:17:00,440 --> 00:17:03,080
Speaker 3: I don't focus on the stock price too much because

341
00:17:03,080 --> 00:17:05,679
Speaker 3: it moves around so much, but it is nice to

342
00:17:05,760 --> 00:17:08,760
Speaker 3: see for our shareholders, particularly those that have been there

343
00:17:08,800 --> 00:17:10,600
Speaker 3: for a long time, to see that appreciation and the

344
00:17:10,640 --> 00:17:13,639
Speaker 3: share price. And then beyond that, we're in a position

345
00:17:13,720 --> 00:17:17,320
Speaker 3: last year to introduce dividends ordinary dividends for the first time,

346
00:17:17,359 --> 00:17:20,480
Speaker 3: which is great, and we've lifted the payout ratio at

347
00:17:20,480 --> 00:17:22,480
Speaker 3: our half year and we've also declared the intent to

348
00:17:22,480 --> 00:17:24,760
Speaker 3: pay three hundred million dollars special dividend as well once

349
00:17:24,760 --> 00:17:28,720
Speaker 3: we achieve regulatory approvals for the aspects of the acquisition.

350
00:17:28,760 --> 00:17:32,359
Speaker 2: We did last year with this half year dibdend, I

351
00:17:32,400 --> 00:17:36,840
Speaker 2: think was a seventy four percent payout. How do you

352
00:17:36,920 --> 00:17:41,520
Speaker 2: balance that need to keep some capital back for growth

353
00:17:41,560 --> 00:17:43,800
Speaker 2: and then keeping shareholders heavy as you say they haven't

354
00:17:43,800 --> 00:17:45,520
Speaker 2: had dibdends for quite some time.

355
00:17:46,840 --> 00:17:49,600
Speaker 3: Yes, well, a couple of things. On an ongoing basis,

356
00:17:50,320 --> 00:17:54,280
Speaker 3: we would expect to have operating cash conversion pretty high,

357
00:17:54,320 --> 00:17:57,480
Speaker 3: like a ninety two hundred percent over time, which is

358
00:17:57,640 --> 00:17:59,760
Speaker 3: which is great in terms of the nature of our

359
00:18:00,000 --> 00:18:02,960
Speaker 3: business model. That'll be a little bit lower as we

360
00:18:03,000 --> 00:18:06,359
Speaker 3: build working capital assoach over their manufacturing investments over the

361
00:18:06,440 --> 00:18:08,199
Speaker 3: next couple of years, but otherwise it should be in

362
00:18:08,200 --> 00:18:12,840
Speaker 3: that territory. So our dividend payout ranges between sixty and

363
00:18:12,920 --> 00:18:15,400
Speaker 3: eighty percent, and as you mentioned at the half, we've

364
00:18:15,400 --> 00:18:17,240
Speaker 3: lifted it towards a higher end of that range, but

365
00:18:17,280 --> 00:18:20,080
Speaker 3: that still allows us to accumulate twenty twenty five percent

366
00:18:20,560 --> 00:18:24,119
Speaker 3: of free cash flow after tax for future investment needs.

367
00:18:24,600 --> 00:18:26,760
Speaker 3: And then if you put that together a high cash conversion,

368
00:18:26,760 --> 00:18:30,720
Speaker 3: a high cash generation potential, with still the ability to

369
00:18:30,760 --> 00:18:33,119
Speaker 3: accumulate some cash flow, then you couple that with how

370
00:18:33,119 --> 00:18:35,560
Speaker 3: strong Air balance sheet is. We've got hundreds of millions

371
00:18:35,560 --> 00:18:37,879
Speaker 3: of dollars still on the balance sheet and some of

372
00:18:37,880 --> 00:18:40,680
Speaker 3: that three hundred million dollars will be returned soon. So

373
00:18:40,680 --> 00:18:42,399
Speaker 3: we've got over eight hundred million dollars of cash on

374
00:18:42,440 --> 00:18:44,959
Speaker 3: the balance sheet, so the special dividend will turn three hundred.

375
00:18:45,440 --> 00:18:47,960
Speaker 3: But the acquisition we made last year and the Pocono

376
00:18:48,000 --> 00:18:52,399
Speaker 3: facility that we acquired, we've got a pretty extensive capital

377
00:18:52,440 --> 00:18:54,880
Speaker 3: investment program there of one hundred million dollars or more,

378
00:18:55,280 --> 00:18:57,879
Speaker 3: and then we've got working capital build associated with that

379
00:18:57,960 --> 00:19:00,760
Speaker 3: of over one hundred million dollars as well. So we'll

380
00:19:00,800 --> 00:19:02,959
Speaker 3: see over time in terms of the capital needs of

381
00:19:03,000 --> 00:19:05,520
Speaker 3: the business and whether there's scope for any additional capital

382
00:19:05,560 --> 00:19:08,879
Speaker 3: management or whether that capital is preferably redeployed in the

383
00:19:08,880 --> 00:19:11,400
Speaker 3: business at a higher return from on behalf of our shareholders.

384
00:19:11,480 --> 00:19:15,840
Speaker 3: So we're mindful of managing our balance sheet and capital

385
00:19:15,880 --> 00:19:17,600
Speaker 3: management appropriately for our shareholders.

386
00:19:17,800 --> 00:19:20,280
Speaker 2: Speaking of Pocono, that was an acquisition you made, I

387
00:19:20,280 --> 00:19:22,280
Speaker 2: think midway through last year.

388
00:19:22,440 --> 00:19:24,000
Speaker 3: And we were delarted to be able to announce that

389
00:19:24,040 --> 00:19:27,280
Speaker 3: acquisition in connection with our full year results. And couple

390
00:19:27,359 --> 00:19:29,800
Speaker 3: with that was the milk supply arrangements of a one

391
00:19:29,800 --> 00:19:32,840
Speaker 3: protein free because we can't do anything without the milk

392
00:19:32,840 --> 00:19:35,119
Speaker 3: pool associated with it, and we've been developing a a

393
00:19:35,240 --> 00:19:38,480
Speaker 3: one protein for milk pool with Fonterra in the North

394
00:19:38,520 --> 00:19:40,600
Speaker 3: Island and the Waikato for some time, so we're able

395
00:19:40,600 --> 00:19:44,080
Speaker 3: to secure those arrangements with the acquisition. That then provides

396
00:19:44,160 --> 00:19:46,320
Speaker 3: us with the market access to China because there's up

397
00:19:46,359 --> 00:19:49,560
Speaker 3: to three registrations that can attach to a facility. This

398
00:19:49,640 --> 00:19:52,040
Speaker 3: came with two and the potential of three, so we

399
00:19:52,080 --> 00:19:55,880
Speaker 3: moved from one product to three products and potentially four

400
00:19:55,920 --> 00:19:58,800
Speaker 3: products to access that eighty percent of the market.

401
00:19:59,520 --> 00:20:03,240
Speaker 2: Speaking of Asia, though, what about Vietnam. That's somewhere where

402
00:20:03,240 --> 00:20:06,080
Speaker 2: you've gone and recently, how's that going.

403
00:20:06,640 --> 00:20:08,920
Speaker 3: Really well, we're quite excited about Vietnam, and we entered

404
00:20:08,920 --> 00:20:11,720
Speaker 3: the market last year. I mean there's been informal trade

405
00:20:11,760 --> 00:20:13,600
Speaker 3: of our products into the market for some time, but

406
00:20:13,600 --> 00:20:15,800
Speaker 3: it's the first time we really formally entered the market,

407
00:20:16,640 --> 00:20:20,399
Speaker 3: getting registration for our infant milk formula products, bringing the

408
00:20:20,400 --> 00:20:24,240
Speaker 3: full basically that full kind of cross border range into Vietnam,

409
00:20:24,400 --> 00:20:27,760
Speaker 3: so infant milk, other nutritionals, even some liquid milk and

410
00:20:28,359 --> 00:20:32,879
Speaker 3: UHD product as well. We've looked at from our emerging

411
00:20:32,920 --> 00:20:36,600
Speaker 3: market strategy, We've screened a lot of markets globally. We

412
00:20:36,680 --> 00:20:40,359
Speaker 3: think Southeast Asia is interesting for US and some particular

413
00:20:40,400 --> 00:20:43,600
Speaker 3: markets within that and potentially the Middle East as well.

414
00:20:43,920 --> 00:20:47,000
Speaker 3: But within Southeast Asia, Vietnam is the real standout in

415
00:20:47,040 --> 00:20:49,760
Speaker 3: terms of its potential and there are a few reasons

416
00:20:49,800 --> 00:20:52,720
Speaker 3: around that's. You know, there's over a million burse per year,

417
00:20:52,800 --> 00:20:56,520
Speaker 3: so there's a lot of newborns. The structure of the

418
00:20:56,520 --> 00:20:59,960
Speaker 3: market is kind of similar in a way to China.

419
00:21:00,119 --> 00:21:03,560
Speaker 3: They use the product for over an extended period, the

420
00:21:03,600 --> 00:21:06,399
Speaker 3: willingness to pay as high. They place a lot of

421
00:21:06,440 --> 00:21:12,320
Speaker 3: value on multinational international brands, premium brands. The competitive set

422
00:21:12,359 --> 00:21:15,879
Speaker 3: is very similar to the competitors we have in China,

423
00:21:15,960 --> 00:21:17,879
Speaker 3: and the familiarity of the brands.

424
00:21:17,760 --> 00:21:20,200
Speaker 2: And dear would have been a good one too, surely.

425
00:21:20,280 --> 00:21:23,720
Speaker 2: But I mean, is that because you're not allowed to

426
00:21:23,760 --> 00:21:26,160
Speaker 2: go in there, you can't get registration we can.

427
00:21:26,240 --> 00:21:29,120
Speaker 3: I mean, obviously there's a huge number of newborns there.

428
00:21:30,800 --> 00:21:33,440
Speaker 3: It's hard to tell exactly, but somewhere around twenty five million,

429
00:21:33,480 --> 00:21:36,000
Speaker 3: or even up to thirty million in some reports. The

430
00:21:36,040 --> 00:21:40,199
Speaker 3: addressable market is challenging for US though, in terms of

431
00:21:40,600 --> 00:21:44,680
Speaker 3: price points and our ability to compete because the despite

432
00:21:44,680 --> 00:21:47,080
Speaker 3: the free trade agreement that's recently been entered into by

433
00:21:47,119 --> 00:21:52,240
Speaker 3: the New Zealand with India, finish goods of nutritional products

434
00:21:52,240 --> 00:21:54,800
Speaker 3: including infants, still attract a very high tax rates, just

435
00:21:54,840 --> 00:21:57,480
Speaker 3: over fifty percent. So that makes it it makes it

436
00:21:57,560 --> 00:22:02,000
Speaker 3: kind of tough to compete there. Saudi Arabia then, yeah,

437
00:22:02,200 --> 00:22:04,280
Speaker 3: Saudi Arabia is quite interesting when we look at the

438
00:22:04,280 --> 00:22:07,919
Speaker 3: Middle East markets. You know, that's again there's there are

439
00:22:08,000 --> 00:22:10,600
Speaker 3: characteristics of that market which are attractive to us. There's

440
00:22:10,600 --> 00:22:13,760
Speaker 3: a high number of newborns about I think about seven

441
00:22:13,920 --> 00:22:17,560
Speaker 3: or eight hundred thousand a year, a high willingness to pay,

442
00:22:17,640 --> 00:22:21,159
Speaker 3: particularly for international brands, they use the product for a

443
00:22:21,160 --> 00:22:23,680
Speaker 3: reasonable period of time as well. So that's something that's

444
00:22:23,720 --> 00:22:25,119
Speaker 3: definitely on our radar.

445
00:22:25,440 --> 00:22:27,000
Speaker 1: There's always challenges a hit too.

446
00:22:27,400 --> 00:22:32,000
Speaker 2: Vistas always have to be cognizant of those, I mean, geopolitical,

447
00:22:33,359 --> 00:22:34,240
Speaker 2: all sorts of things.

448
00:22:34,359 --> 00:22:36,840
Speaker 1: What are the main challenges that you really have to

449
00:22:36,920 --> 00:22:39,040
Speaker 1: keep on top of me?

450
00:22:39,440 --> 00:22:41,760
Speaker 3: Maybe just touch on the geopolitical thing because it's obviously

451
00:22:42,480 --> 00:22:45,280
Speaker 3: having a large part of our business in China. That's

452
00:22:45,560 --> 00:22:47,440
Speaker 3: you know, many investors kind of can be a little

453
00:22:47,440 --> 00:22:50,000
Speaker 3: bit polarizing, like they either kind of can accept that

454
00:22:50,119 --> 00:22:53,000
Speaker 3: risk or not. And for us, we obviously embrace it

455
00:22:53,000 --> 00:22:55,600
Speaker 3: because it's the core part of our business. But I

456
00:22:55,600 --> 00:22:58,280
Speaker 3: think for investors it's worth bearing in mind sort of

457
00:22:58,359 --> 00:23:01,320
Speaker 3: a risk assessment point of view. China's and New Zealand's

458
00:23:01,320 --> 00:23:04,320
Speaker 3: always had a pretty constructive trading relationship. New Zealand had

459
00:23:04,320 --> 00:23:07,440
Speaker 3: the first free trade agreement with China. There's a lot

460
00:23:07,480 --> 00:23:11,480
Speaker 3: of Chinese investment into New Zealand From a dairy nutritionalist

461
00:23:11,480 --> 00:23:14,760
Speaker 3: point of view, so it's a it's an important investment

462
00:23:14,800 --> 00:23:20,160
Speaker 3: and source of dairy and protein for the country we

463
00:23:20,280 --> 00:23:23,640
Speaker 3: have From a relationship point of view, we have very

464
00:23:23,640 --> 00:23:27,879
Speaker 3: strong partnership with one of the leading state owned enterprise,

465
00:23:27,920 --> 00:23:30,359
Speaker 3: tore One state owned enterprise. And then if you think

466
00:23:30,400 --> 00:23:33,600
Speaker 3: about it from a category point of view, like infant formulas,

467
00:23:34,720 --> 00:23:37,399
Speaker 3: one of the last categories that you would that would

468
00:23:37,400 --> 00:23:41,320
Speaker 3: be potentially impacted by geopolitical concerns. I think if you

469
00:23:41,359 --> 00:23:45,440
Speaker 3: think about it, it's it's product that is being supplied

470
00:23:45,480 --> 00:23:47,960
Speaker 3: and fed to the most vulnerable consumers. And you've seen

471
00:23:47,960 --> 00:23:50,800
Speaker 3: in other other situations around the world where our category

472
00:23:50,920 --> 00:23:54,720
Speaker 3: still is still traded in those types of situations as well.

473
00:23:54,800 --> 00:23:57,000
Speaker 3: So your other question was around sort of what concerns

474
00:23:57,000 --> 00:23:57,320
Speaker 3: that we have.

475
00:23:57,480 --> 00:24:00,479
Speaker 2: Or well, I think of other challenge. I mean, if

476
00:24:00,520 --> 00:24:03,359
Speaker 2: there was another pandemic, how would you go.

477
00:24:04,280 --> 00:24:07,040
Speaker 3: I think we're much better place to cope with that,

478
00:24:07,119 --> 00:24:09,120
Speaker 3: and I think the whole world would have better experience

479
00:24:09,160 --> 00:24:11,760
Speaker 3: around that in terms of the flow of goods and

480
00:24:11,800 --> 00:24:14,680
Speaker 3: services and how that kind of gets treated in that situation.

481
00:24:14,760 --> 00:24:17,040
Speaker 3: Because at that time a large part of our business

482
00:24:17,160 --> 00:24:18,160
Speaker 3: was through the digo channel.

483
00:24:18,359 --> 00:24:19,480
Speaker 1: What is the digo channel?

484
00:24:19,480 --> 00:24:23,720
Speaker 3: So people the digo channel, Well, it's a Chinese term.

485
00:24:23,880 --> 00:24:27,120
Speaker 3: It refers to China a person buying for somebody else.

486
00:24:27,760 --> 00:24:30,160
Speaker 3: So it started literally with it like a suitcase trade,

487
00:24:30,280 --> 00:24:34,520
Speaker 3: going back back in the day when students and tourists

488
00:24:34,640 --> 00:24:37,320
Speaker 3: and people working on airlines would take product back to

489
00:24:38,440 --> 00:24:39,240
Speaker 3: their home market.

490
00:24:39,359 --> 00:24:39,560
Speaker 4: Yeah.

491
00:24:39,640 --> 00:24:41,600
Speaker 3: Yeah, So it started that way, but it progressed into

492
00:24:41,640 --> 00:24:44,480
Speaker 3: more sophisticated channels like gift stores and pick and pack

493
00:24:44,560 --> 00:24:48,480
Speaker 3: operations and online fulfilment by corporate digo into the market

494
00:24:48,520 --> 00:24:51,239
Speaker 3: and wholesaling locally within the market as well. So that

495
00:24:51,280 --> 00:24:55,320
Speaker 3: grew rapidly and was incredibly successful for a two for

496
00:24:55,400 --> 00:24:57,479
Speaker 3: many years, and in many ways it built the brand

497
00:24:57,560 --> 00:24:59,680
Speaker 3: because you literally had it was well before my time,

498
00:25:00,040 --> 00:25:03,040
Speaker 3: literally had from what I understand, tens of thousands of

499
00:25:03,040 --> 00:25:05,879
Speaker 3: people being the voice of the brand and word of

500
00:25:05,920 --> 00:25:09,520
Speaker 3: mouth and recommending the product to consumers in China. So

501
00:25:09,560 --> 00:25:12,120
Speaker 3: we wouldn't be where we are today without those foundations.

502
00:25:12,720 --> 00:25:15,439
Speaker 3: So COVID disrupted that. But what we've had to do

503
00:25:15,480 --> 00:25:18,920
Speaker 3: subsequently is is double down on investment in the brand

504
00:25:18,960 --> 00:25:21,399
Speaker 3: in terms of our marketing. So our marketing back in

505
00:25:21,400 --> 00:25:23,159
Speaker 3: twenty twenty one when I joined, about one hundred and

506
00:25:23,200 --> 00:25:25,640
Speaker 3: sixty or seventy million dollars like this year, like we're

507
00:25:25,680 --> 00:25:27,440
Speaker 3: more than doubled that this year it should be three

508
00:25:27,520 --> 00:25:30,720
Speaker 3: hundred and fifty plus million dollars, and that's in consumer marketing,

509
00:25:30,760 --> 00:25:33,879
Speaker 3: medical marketing, trade marketing, like there's a huge amount of

510
00:25:33,880 --> 00:25:36,600
Speaker 3: focus on building our brand and sorry, and coming back

511
00:25:36,600 --> 00:25:39,080
Speaker 3: to your question around how could a pandemic or you

512
00:25:39,119 --> 00:25:41,600
Speaker 3: know two point zero or that impact is like those channels,

513
00:25:41,600 --> 00:25:44,800
Speaker 3: those e commerce channels and presence we have in China

514
00:25:44,880 --> 00:25:47,199
Speaker 3: in the offline and that that's a much more secure

515
00:25:47,280 --> 00:25:50,000
Speaker 3: environment and distribution than through the digo channel that was

516
00:25:50,000 --> 00:25:50,840
Speaker 3: heavily disrupted.

517
00:25:51,800 --> 00:25:53,560
Speaker 2: On that note, David, I was going to ask you

518
00:25:53,640 --> 00:25:56,800
Speaker 2: what are you excited about for the next year or

519
00:25:56,840 --> 00:25:57,840
Speaker 2: so with a two.

520
00:25:58,680 --> 00:26:02,040
Speaker 3: We've got a lot to execute this next year. So

521
00:26:02,080 --> 00:26:04,359
Speaker 3: I'm looking forward to the growth continuing on the front

522
00:26:04,440 --> 00:26:08,639
Speaker 3: end of our business. In our we've got some new

523
00:26:08,640 --> 00:26:11,680
Speaker 3: products to bring to markets. And in the other nutritional space,

524
00:26:11,680 --> 00:26:14,280
Speaker 3: we've got so much innovation going on there. So in

525
00:26:14,359 --> 00:26:17,560
Speaker 3: kids nutrition, in seniors nutrition, which is a massive market.

526
00:26:17,800 --> 00:26:20,159
Speaker 3: So there's three hundred and odd million people over the

527
00:26:20,200 --> 00:26:24,439
Speaker 3: age of sixty in China, which there's twenty million people

528
00:26:24,600 --> 00:26:26,960
Speaker 3: you know entering that category over time, and they have

529
00:26:27,040 --> 00:26:31,320
Speaker 3: nutritional needs. So we've got a four to five milk

530
00:26:31,359 --> 00:26:33,919
Speaker 3: powder range. They're targeted at the seniors, you know, with

531
00:26:34,000 --> 00:26:36,760
Speaker 3: a bone proposition, heart health, gut health, et cetera. So

532
00:26:36,760 --> 00:26:39,640
Speaker 3: that's going well early days yet. And then we announced

533
00:26:39,640 --> 00:26:43,879
Speaker 3: our intention to enter the pediatric supplements market, which is

534
00:26:43,880 --> 00:26:47,400
Speaker 3: pretty exciting. That's pediatric supplements can cover, you know, benefit

535
00:26:47,440 --> 00:26:55,480
Speaker 3: areas like immunity, you know, probiotics around allergy protection plus

536
00:26:56,040 --> 00:27:00,760
Speaker 3: gut health, or brain and eye development, or cow calcium

537
00:27:00,800 --> 00:27:02,880
Speaker 3: to support growth and things like that. So there's lots

538
00:27:02,880 --> 00:27:08,680
Speaker 3: of different supplements that mothers and families may use with

539
00:27:08,160 --> 00:27:12,720
Speaker 3: their infants and toddlers and also over an extended period

540
00:27:12,800 --> 00:27:15,720
Speaker 3: right through to the age of ten eleven twelve, these

541
00:27:15,720 --> 00:27:18,080
Speaker 3: products have been used and it's been growing quite rapidly,

542
00:27:18,119 --> 00:27:19,200
Speaker 3: like it's a big market.

543
00:27:20,640 --> 00:27:23,840
Speaker 2: Look, thanks David for coming in today. It's been you know,

544
00:27:23,880 --> 00:27:25,800
Speaker 2: we could talk for ages and so we'll have to

545
00:27:25,800 --> 00:27:27,760
Speaker 2: have you back a bit sooner, I think next time.

546
00:27:28,560 --> 00:27:29,760
Speaker 3: Thank you for having me on the program.

547
00:27:29,760 --> 00:27:32,520
Speaker 2: I appreciate it, and thanks everyone for tuning in. You

548
00:27:32,560 --> 00:27:35,640
Speaker 2: can watch Shed Lunch on YouTube or follow us on

549
00:27:35,680 --> 00:27:38,560
Speaker 2: your favorite podcast app. Leave us a rating and leave

550
00:27:38,640 --> 00:27:41,080
Speaker 2: us know what you'd like to hear next ma too

551
00:27:41,160 --> 00:27:41,280
Speaker 2: wa