The A2 Milk Company Ltd share price sinks lower again

In morning trade the A2 Milk Company Ltd (ASX: A2M) share price has continued to sink lower following last week’s sell-off despite the dairy company responding to recent media coverage relating to the launch of Nestle’s A2 protein-only infant formula product.

At the time of writing a2 Milk Company’s shares are down 5.5% to $10.83.

What did a2 Milk Company have to say?

According to the release, management has reminded the market that it has previously advised that it expects broader interest in the A1 protein-free category due to positive developments in the science and the strong growth it has achieved.

However, the company remains confident that it is uniquely positioned to benefit from expansion of the category over time and believes it has an edge over the competition due to its strong brand, enhanced consumer credibility as the creator and pioneer of the A1 protein-free offering, ANZ sourced milk supply, and ongoing research and development into A1 protein-free products.

It went onto say that: “The a2 Milk Company is the only company engaged in the sourcing, processing and marketing of solely A1 protein free dairy and nutritional products in global markets. This core principle contrasts significantly with likely new entrants who will need to consider how to communicate internally and externally the benefits of a new A1 protein free variant whilst their traditional range of products continues to include A1.”

Which I think is a great point. Nestle, which announced its A2 protein-only infant formula product last week will have to be careful with its marketing to not disparage its products that include A1 proteins.

Should you buy the dip?

As I said yesterday, I think the a2 Milk brand is strong enough to fend off competition and this sell-off could prove to be a buying opportunity for investors.

However, I would hold off an investment until there are signs that the selling has stopped.

The same applies to the shares of rival Bellamy’s Australia Ltd (ASX: BAL) which has also come under heavy selling pressure recently.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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