The A2 Milk Company Ltd (ASX: A2M) has been frothing up a storm in August, shooting up 10%.
The company's shares closed on Wednesday at $4.98 apiece after starting the month at $4.54.
So why has the A2 Milk share price been climbing lately?
Image source: Getty Images
The US opportunity
It seems its peer Bubs Australia Ltd (ASX: BUB) has regenerated excitement in the milk formula businesses after securing a major supply deal in the US and posting a stellar quarter for June 2022.
However, A2 Milk hasn't experienced the same success. It has actually hit a bit of a roadblock in its bid for access to the US market, as outlined by my colleague Sebastian Bowen.
On 12 August, the US Food and Drug Administration (FDA) advised it had to defer further consideration for an enforcement discretion to import infant milk formula products into the United States.
According to the Sydney Morning Herald, another A2 Milk competitor Bellamy's gained FDA approval shortly after Bubs.
Despite the hold up, A2 Milk CEO David Bortolussi remains confident. Bortolussi told the SMH the company had the relationships necessary on the ground to handle distribution and made the following comment:
Feedback from our US team on the ground is that the infant milk formula crisis has not been solved, with significant retail out-of-stock issues continuing across the country.
If Bortolussi's optimism comes to fruition, a major contract in the US will act as a significant growth driver for the A2 Milk share price.
Another competitor considers ASX listing
The Australian Financial Review recently reported that another infant formula company Care A2 Plus is preparing for an ASX listing.
Care A2 Plus produces infant and toddler formula using single-sourced milk from Australian grass-fed A2 cows in Victoria. Unlike A2 Milk, it managed to gain approval from the FDA in early July to supply millions of tins to retailers short of supply.
The company advised the AFR that its first orders for Care A2+ Premium Infant Formula with iron were due to ship to the US in August.
Dominic Galati is the founder of Care A2 Plus and a former SBS executive.
Its chairman Walter Bugno said the company has more than 300 shareholders, including Chemist Warehouse.
A2 milk share price snapshot
The A2 Milk share price looks horrid across the last 12 months, falling 25% but the recent US shortage has driven it higher.
Across the same period, the S&P/ASX 200 Index (ASX: XJO) dropped 5% and like A2 Milk, it rallied with a 7% jump in the last month.
Given the roadblock and the potential listing of a competitor, which is already supplying to the US, it's quite curious to see the A2 Milk share price climbing of late.
