A2 Milk share price falls as key leader resigns
A2 Milk shares continue to fall as it was announced yesterday that the company’s Chief marketing Officer is set to depart.
The a2 Milk (ASX: A2M) share price fell 1.19% yesterday – closing out the session at $11.62 per share.
This modest fall comes off the back of news that the company's Chief Marketing Officer – Susan Massasso – is planning on stepping down from her role by the end of February 2020.
In saying that, she will remain a part of A2’s senior leadership team up until June 2020.
Speaking of this managerial shakeup, esteemed a2 Milk Chief Executive Officer, Jayne Hrdlicka said:
'Susan has been instrumental in setting the global marketing strategy for the company and I am delighted that Susan will remain with the business until the end of the financial year to assist with implementation and to ensure the brand strategy focus is maintained, while supporting the transition of a new CMO.'
Operationally efficient as ever, the company noted that it would commence searching for a Chief Marketing Officer immediately.
Commenting on her own departure, Susan Massasso said:
'It has been a great privilege to be part of such an extraordinary company. It has been an incredible six year and I’m looking forward to supporting Jayne and the leadership team going forward.'
No reason was given for her resignation.
A2 Milk share price: why marketing is the future
A2 Milk (ASX: A2M) has indeed been stepping up its marketing spend in recent times, spending NZ$135.3 million or 10.4% of sales in FY19.
This represents a year-over-year increase of 82.7% – as A2 Milk rushes to grow its brand presence and revenue in China and the US.
'We anticipate continued growth in revenue across our key regions supported by increasing brand and marketing investment in China and the US,' said the company during its latest full-year results release.
Indeed, as A2M flagged in its FY19 results, it expects to bump up its marketing spend to 12% of revenue (opposed to 10.4% in FY19), a fact that many brokers flagged as a potential concern.
Today’s news ultimately forms part of a broader share price downdraft for a2 Milk. As noted above, analysts and investors already seemed concerned that a2 Milk was going to have to spend more (on marketing) to generate significant (read, possibly comparable) revenue growth going forward.
And while such an equation seems a necessary evil whichever way you cut it: The simple fact is it’s much harder to double NZ$1.3bn in revenue than it is NZ$130m.
The market though, seems well aware of that fact, having bid the company's stock down 32% since July.
This all also underscores another fact: that given A2’s reliance on an aggressive marketing plan for growth, finding CMO of Susan Massasso’s calibre will likely prove paramount.
Let’s hope a2 Milk (ASX: A2M) finds one.
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