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7 Points to Review the Chinese Infant Formula Market in 2021H1

In 2021H1, the Chinese infant formula market has seen several crucial changes in the policy and market sides. ChemLinked has summed up seven key points to help stakeholders better understand the infant formula market dynamics.

Release of new national standard

In March 2021, China released the new national food safety standards for infant formula (GB 10765-2021), follow-up infant formula (GB 19766-2021), and young children formula (GB 10767-2021). These three standards replace GB 10765-2010 and GB 10767-2010, and will be effective from February 22, 2023 (which means there’s a two-year grace period).

Besides, as the first batch of infant formula registration certificates will expire in 2022, the second wave of IF recipe registration will be quite competitive under new requirements, and the influx of new recipe applications and renewal applications will influence the approval speed. ChemLinked assumes the effect will become more pronounced for foreign brands due to factors like geographical location, pandemic, China’s governmental support to domestic enterprises, etc.

Related reading:

How Will New GB Standards Shape Chinese Infant Formula Market?

Newly Approved Recipes in H1, 2021

Fewer births

According to the seventh national census data released by National Bureau of Statistics (NBS) in May, China's population on the mainland reached 1.41178 billion in 2020, increasing 5.38% from 2010.

China recorded 12 million new births in 2020, marking the fourth consecutive year of decline. The continuing drop in the number of women of fertile age, the delay of childbirth, and the rising cost of childbearing and parenting are all factors leading to the shrink of the newborn number. The falling birth rate would severely affect infant formula consumption.

Related reading:

https://market.chemlinked.com/industry/consumption-opportunities-behind-the-latest-demographic-figures

Release of new birth policy

In May, China announced to further lift its family planning policy to allow each couple to have up to three children. The new birth policy and its relevant supporting measures will help improve China's population structure, respond to the aging population, and preserve its human resource advantages.

According to CITIC Securities1, the three-child policy is expected to increase the number of new births by about 10% in the short term. However, factors affecting the number of newborns also include family economic level and the birth willingness of the new fertility generation (the post-90s and 95s). Currently, the fertility rate of fertile women in China is 1.3, far below the 2.1 benchmark.

Import volume continued to fall

The infant formula imported volume dropped 23.3% year on year from January to May2. In the first quarter of 2021, the import volume of baby milk powder fell by 17.6% year on year and showed no signs of recovery in April and May, with a year-on-year decline of 12.7% in May. 

From 2015 to 2017, China's baby milk powder imports fluctuated but still recorded a high growth rate of more than 20%. 2018 was a turning point where the growth rate of imported infant formula slowed down significantly to below 10%. 2020 seemed to be the second turning point where the import volume recorded negative growth of 3%.

Domestic vs. imported: imported brands’ advantages shrink

According to Euromonitor3, in 2020, the market shares of CR10(the top 10 companies by market share) in China's infant formula market reached 76.9%. Domestic brands occupied five seats in CR10 and accounted for 54% of the total market share. In 2020, Feihe surpassed Wyeth to be the top 1 brand with a market share of 14.8%, which continued to expand to 18.5% year to date in the first quarter of 2021.

As Chinese consumers’ confidence in domestic milk power shores up, it is expected that domestic brands would edge over imported brands in the future competition.

Related reading:

https://market.chemlinked.com/industry/fy-2020-review-are-international-infant-formula-brands-hitting-snags-in-the-chinese-market

Intensified marketing campaigns

The new generation of infant formula consumers are digital-savvy, picky, and have many segmented demands. Therefore, infant formula brands invested more money and resources into digitalized branding and marketing to gain their attention.

Domestic brands such as Yili Jinlingguan, Feihe, Junlebao, Biostime, Kabrita, and Blue River are active players with high visibility in TV and variety show advertising, elevator advertising, and maternal and infant media marketing. E-commerce live-streaming, KOL marketing, and social media branding have also become popular methods to strengthen brand awareness and reach more potential consumers.

Some brands also started to leverage the newly released three-child policy to do marketing. For example, Synutra has launched a welfare campaign to help ease the burden on families with three children. It will offer free infant formula to families with the third child born between June 1, 2021 and June 1, 2022 for one year.

More homogenize products

The first half of 2021 witnessed more brands rolling out differentiated A2 milk powder, A2 organic milk powder, goat/sheep milk powder, children's milk powder, grass-fed milk powder, and targeted channel products to help them stand out in the heated competition.

The continuous launch of new and upgraded products has led to more homogenized products on the market. A2-beta casein, grass-fed and other differentiated selling points are no longer niche concepts but becoming common hypes.

For stakeholders, it is essential to re-examine their products and re-formulate new collections under the new registration regulation. For instance, they can focus on innovation in milk source, technique, ingredients, and formula to upgrade their products to match consumers’ needs for high-quality milk powder products.

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