Which high flyers will withstand the blowtorch of competition?
Some of our high-flying concept companies are about to feel the blowtorch of increased competition. How they respond could be provide an insight into whether they are prepared for the new competitive landscape – or if they can do anything about it.
For example, last week The New Zealand Herald reported that Nestle, the world’s biggest food and beverage company, and the world’s 64th biggest company as ranked by Fortune Magazine, “has launched a brand of infant formula that uses the A2 beta-casein protein made popular by the New Zealand and Australia-listed a2 Milk Company.” The product is already understood to be available in China, marketed as Illuma ‘Atwo’.
A2 Milk responded by suggesting more competition would raise awareness of the product and grow the category for everyone.
“…new entrants should assist in building credibility and awareness for the A1 protein-free proposition, and hence build the overall category more quickly”
After Amazon announced its intention to operate in Australia, Australian e-commerce operator Kogan responded[1]: “We’re excited by Amazon’s launch, anything that can be done in Australia to bring more significance to our online retail industry to make more people aware of it, the better.”
As an aside, a month after those comments were made to News.com.au, Kogan’s founder announced he had sold shares in the company[2].
Investors and advisers should think carefully about any significant change in the competitive landscape for a company. And if a company’s share price is implying a sustained period of very high rates of uninterrupted earnings growth, that thinking and analysis should be conducted with some urgency.
In Australian brick-and-mortar retailing, incumbent operators like Myer and the major supermarkets are perhaps less sanguine about the arrival of larger foreign rivals such as Uniqulo, Zara and Aldi. That could be experience talking or it could be they don’t have the marketing skill of the concept upstarts.
[1] http://www.news.com.au/technology/online/kogancom-founder-reveals-plan-to-take-on-amazon-and-give-aussie-telco-industry-a-shakeup/news-story/be9b7b238abbcf39046ab8a31f5c3bf4
[2] http://www.afr.com/street-talk/kogan-founders-to-reduce-kogancom-stake-again-20180225-h0wmqc
Investors should think carefully about any significant change in the competitive landscape for a company. Click To Tweet
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
