Move over A2 Milk (ASX:A2M), there’s a new company on the block

Attracting a bevy of celebrity investors, this newly listed company now boasts a market cap of around $13 billion.

| More on:
dairy asx share price represented by grandfather and grandson both drinking glasses of milk

Image source: Getty Images

The A2 Milk Company Ltd (ASX: A2M) share price just can’t seem to catch a break of late, tumbling on downgrade after downgrade. Without the A2 protein milk seller’s growth engine in China, positive investor sentiment has waned in a big way.

While it has been a bleak time for the Australian milk company, things are looking brighter further afield. In the United States, there is a newly listed alternative milk producer on the block. Swedish plant-based milk company Oatly Group (NASDAQ: OTLY) successfully listed on the NASDAQ last week, with its shares now sitting almost 22% above their initial public offering (IPO) price.

Let’s take a moment to compare the two.

ASX-listed A2 Milk’s Achilles’ heel

Firstly, A2 Milk and Oatly are both traditional cow’s milk alternatives, though there’s still a significant difference between the two. While A2 Milk offers an easier to digest product that lacks the A1 protein, Oatly goes a step further and cuts the cows out completely.

Oatly is the world’s largest oat milk company. Being made from oats, it is a vegan-friendly alternative to cow’s milk for those who are lactose intolerant.

Although the company is new to public markets, Oatly was founded in 1994. Today, its products are sold in 60,000 shops and more than 32,000 coffee shops across 20 countries.  

This points out a recent area of weakness for the ASX-listed milk company. While only 13% of Oatly’s revenue is derived from Asia, over 48% of A2 Milk’s FY21 first-half sales were from China and other Asian geographies. That leaves A2 heavily exposed to geopolitical risks associated with China.

Oatly is truly lactose free

A2 Milk acts an alternative for those who may have difficulty digesting standard cow’s milk. Without getting into the nitty-gritty details, the company’s milk still contains lactose. However, Oatly’s oat milk is completely dairy-free, lactose-free, and milk protein-free. Therefore, it is arguably an option for a wider audience of people with allergies or significant intolerances.

The plant-based food and beverage market is a high-growth industry. An expected growth in the vegan population and an increasing intolerance to animal protein is set to provide strong tailwinds. Already, Oatly estimates its total addressable market is in the realm of US$600 billion.

How the numbers stack up

Looking at the financials, Oatly achieved approximately A$617.5 million in revenue for the full year ending 31 December 2020. For comparison, A2 Milk’s revenue for the trailing twelve months ending 31 December 2020 came in at A$1,490 million.

Additionally, the US-listed Oatly is currently loss-making on the bottom line. Meanwhile, A2 Milk remains profitable despite challenging conditions.

Although A2 Milk generated more than double the revenue of Oatly in FY20, its freshly listed foe commands a market capitalisation of around A$13 billion – which is more than triple the valuation of ASX-listed A2 Milk, based on its current share price.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

Sad person at a supermarket.
Consumer Staples & Discretionary Shares

Why is the Woolworths share price sliding 7% today?

Aussie investors heed Target's inflationary warning...

Read more »

Supermarket trolley with a red arrow pointing downwards, symbolising a falling share price.
Consumer Staples & Discretionary Shares

Here’s why the Coles share price is tumbling 5% today

Could recession talk be impacting the supermarket's stock?

Read more »

wine share price rising represented by two people raising wine glasses
Consumer Staples & Discretionary Shares

Treasury Wine share price beating the sell-off amid ‘made in China’ push

Let's take a closer look.

Read more »

A woman leaps into the air with loads of energy, in a lush green field.
Consumer Staples & Discretionary Shares

Own Woolworths shares? The company’s about to hit a major sustainability milestone

Woolies' South Australian operations are set to switch off from fossil fuels in July thanks to a new partnership.

Read more »

A trader stand looking at a sharemarket graph emblazoned with the words buy and sell
Consumer Staples & Discretionary Shares

Could the Wesfarmers share price have already bottomed?

Could Wesfarmers shares be in the buy zone today?

Read more »

Woman thinking in a supermarket.
Consumer Staples & Discretionary Shares

Why I think Coles is a better ASX dividend share than Woolworths

Are Coles shares a better pick for dividends than Woolworths?

Read more »

A woman in her 20s holds a glass of milk up towards her face as if to drink it but makes a grimacing face as though she has smelt that the milk might be off or soured.
Consumer Staples & Discretionary Shares

A2 Milk share price wavers amid class action news

Certain shareholders may be eligible to join the class action.

Read more »

Consumer Staples & Discretionary Shares

Here’s why the Eagers share price is sliding today

Investors don't appear to be satisfied from the company's announcement.

Read more »