Expert Dialogue: Uncertainties for Stakeholders in Infant Formula Sector to Consider

Although the fertility policy has been liberalized, the population will continue to decline this year and next year, due to the aftermath of the Covid-19 pandemic. However, pro-fertility policies will be promulgated successively in the future. The birth rate, I believe, will turn positive in 2023, with the number of newborns recovering to about 13 million with an obvious growth rate. In the next decade, we believe China's birth rate will grow at a year-on-year rate of about 1.5%.

Extracurricular tutoring activities does greatly influence the normal education environment and people’s household expenditure structure in China. Compared to the tutoring expenditure, the cost of infant formula seems to account for the smallest portion, which is far from being regarded as a financial burden on families.

But we have to admit that the high price of infant formula is a problem worth attention. The government noticed this problem as well, but it will not use executive actions to interfere with it. Measures related to anti-trust law may be adopted instead in the future. Besides, the market can also adjust the high price itself. We can see the overall infant formula price is decreasing gradually in recent years through promotion activities, etc. Hence, at this stage, it is also unnecessary for the government to interfere with the high price.

Excessive marketing is another issue people are concerned about in recent years. But here I have to emphasize the scope of excessive marketing. It can be divided into two situations. First, we think exaggerated marketing with a vast amount of advertising fee belongs to excessive marketing. But I do not believe these marketing behaviors have greatly influenced people’s purchase preference. The most influential way lies in offline consumer education. However, offline consumer education is rational and necessary since infant formula is a specialized nutritious product for babies. Hence, the investment in this field should not be regarded as excessive marketing. The real problem is now many enterprises are mixing up consumer education together with product marketing. This is wrong.

So will excessive marketing be regulated in the future? My answer is behaviors like putting high investment into advertising, exaggerated advertising, and hiring endorsers with high cost, will certainly be restrained.

My advice to companies is that they should do a solid job of educating consumers, lower the marketing fee and re-examine the pricing strategy to make a rational price system. Quite a number of enterprises have been developing high-end products inefficiently, with high cost and low income. Enterprises should think out of the box.

So far, the pandemic has had a significant impact on dairy imports, mainly from three aspects. First, it placed strains on the entire logistics system, which increased the product cost. Second, the detection of coronavirus on the food packaging greatly panicked consumers, which heavily hit the imports. Third, in order to curb the pandemic, import control measures released by the government also dampened imports. But along with the further stabilization of pandemic, the import market will gradually recover from the predicament.