a2 Milk Company Ltd (ASX: A2M) left it late on Tuesday to announce some exciting news.
The a2 protein company announced that it will be taking the a2 brand across the North East region of the United States from January 2018.
The company said that it has been focused on achieving sales-based targets prior to expanding its footprint on a region-by-region basis. Sales are now achieving sustainable levels in California, the South East region and select natural retail chains.
The North East is home to around 60 million consumers and accounts for around a fifth of the total milk volume in the US. The North East comprises of the states of New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, New Hampshire, Massachusetts, Vermont and Maine.
The a2 Milk brand will be sold in a number of major retailers including Ahold, Shoprite, Safeway, H-Mart and Fairway Foods. This builds on a growing presence in the natural channel in this region through Wholefoods, Sprouts and The Fresh Market.
This expansion will mean that a2 Milk will be sold around 5,000 retail stores compared to 3,600 stores before this growth.
The company will support this distribution by investing in marketing of the "Love Milk Again" advertising campaign. This increased expenditure had been incorporated in the forecasted higher marketing expense as advised at the AGM two months ago.
Management advised that the company is also investigating new product opportunities for the US market to take advantage of growing brand awareness and expanded distribution.
Foolish takeaway
a2 Milk has managed to outperform the market's expectations for a number of years. It doesn't surprise me that a2 is accelerating its growth because it's generating a large amount of interest in all the countries it's being sold in and wants to take advantage of the opportunity.
The business is currently trading 35x FY18's estimated earnings. At this price, I think it could still be a very good medium-term buy.
