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China Slow to Accept Liquid Infant Formula

  •   13 May 2019
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The official release of Japan’s liquid infant formula regulations and the successful launch of ready-to-feed liquid infant formula products have signaled that the infant formula sector in Japan has stepped into a new era. Liquid infant formula products are already well-established product lines in other global markets, however, Chinese consumers have been slower to accept these products. The successful launch of these products in Japan does offer the prospect of influencing consumer purchasing preferences in China. Often there is a lag period between the success of trending products and new consumption practices in Japan and the entry and success of the product in China. 

What is liquid infant formula?

Liquid infant formula is a product designed to serve as a breast milk substitute and addition to a child’s early nutrition. It performs a similar role to powdered infant formula, which also has three stages, stage 1 for infants under 6 months, stage 2 for babies between 6-12 months and stage 3 for babies from 12-36 months.

Currently, the infant formula products we can see in the market can be mainly categorized into three forms, powdered infant formula, liquid concentrated infant formula (need to add some water, read more info at How to prepare liquid concentrate infant formula [1]) and ready-to-feed infant formula, usually we also call it "liquid infant formula". For liquid infant formula, there is no need to add water. Just open the bottle, and mothers can feed their babies directly and easily. Due to its convenience, it has become a norm for mothers in Europe, the US, etc.

Development in Japan

Despite the fact that liquid infant formula is prevalent among European countries and countries like the US for decades, it is still new to Chinese and Japanese consumers.

Japan used to curb the circulation of both domestic and imported liquid infant formula (IF) products, due to the absence of relevant laws and regulations. In the past, infant formula products were only defined as "powdered" milk formula in Japan’s Food Sanitation Act. Hence, although liquid milk formula received popular recognition during recent natural disasters in Japan, liquid IF products were still not officially available.

However, despite lacking an official product standard and essentially classed as illegal, due to the convenience and utility of these products in emergency situations, Japanese mothers demanded the approval of liquid IF in Japan. On November 19th, 2014, a Japanese mother started a petition called “We need ready-to-feed baby formula in Japan! [2]” and got 43k supporters. 
In order to meet market demands and social demands (to encourage male citizens to help raise the kids), on August 8, 2018, Japan issued new standards [3] for liquid infant formula under the Food Sanitation Act. Until now, according to the Japan Times [4], only Glico and Meiji have got approval from government authorities. In March 2019, Glico debuted the first domestic liquid infant formula in Japan. They are available both online and in the offline maternal shops. Meiji plans to launch a new product in Summer 2019.

Besides these two companies, no other companies have shown any significant interest in launching a new product according to a report by Tamahiyo [5], a famous maternal magazine in Japan. Up to the end of June 2018, no launch plan was issued by any other Japanese manufacturers who seem to be biding their time and waiting to see how these new products perform.

Liquid Milk Formula in China 

China is the world's largest infant formula market. In 2017, it occupied 43% of the dairy ingredients usage in Asia, according to 2019 Zenith Global Dynamic Maternal Nutrition Market in Asia Report [6]. And the total sales value of China's infant formula hit over 160 billion CNY in 2018, as mentioned in a report by Euromonitor [7].
However, according to the data from the National Bureau of Statistics of China [8], China had 15 million newborns in 2018, 2 million fewer than in 2017 representing a YOY decrease of 11%. Song Liang, a senior analyst in dairy industry believed the decrease of newborns would lead to an even sales performance of infant formula this year. Gao Hua Securities Limited [9] projects that the total sales volume of infant formula is predicted to decline by 2% in 2020.

Although the birth rate declined, more and more enterprises have successfully passed infant formula registration. Dairy enterprises have to differentiate their products in this competitive market. Unlike the regulatory compliance issues faced by manufacturers of powdered infant formula, manufacturers of liquid infant formula only need to pass the CNCA/GAC manufacturer registration and are not required to undergo recipe registration.

In this case, more and more domestic and overseas enterprises turned their gaze successively upon China’s liquid baby milk.

Timeline for enterprises launching liquid baby milk in China

(*Note: “/”means the products are taken off from the shelf right now)

TimeBrandPresent online sales channel
T-mallJD.com
July 2015Candia/
 
/
March 2016
(stage 4)
Beingmate//
Nov. 2016
(stage 4)
Biostime//
Dec. 2016
(stage 4)
Wyeth//
June 2017Ofmom/Stage 2 and 3 (around 50 comments)
Oct. 2017
(stage 4)
Synutra//
Nov. 21, 2017Mead Johnson
(Enfamil)
Stage 2 and 3Stage 1, 2 and 3

Although many manufacturers have tested the ‘ready-to-feed liquid infant formula’ waters in the past several years, we can now only find Mead Johnson and Ofmom products on the two biggest e-commerce platforms in China. After inquiring we were informed by the customer service of Biostime and Wyeth that the staff indicated that they have stopped the production of liquid formula already and that products are no longer available for purchase. In addition to standard general trade channels, on CBEC channels it is possible to find products such as Semper, PediaSure and Similac. 
Amongst all the liquid infant formula brands Enfamil has done the best job in terms of pure sales. According to T-mall and JD.com data, from April 1st to April 17th, 2019, it sold 604 bottles of stage 2 liquid IF and 3855 bottles of stage 3 on Tmall. Customer feedback on the product on JD.com, includes 72k comments and a 99% satisfaction rate. Among all the comments, most of the customers have mentioned the word “convenient”.

What's holding back liquid infant formula in China? 

As a new sector, the liquid infant formula industry is regarded as an untapped market in China. Yet according to data from Syntun [10], a well-known data monitoring company in China, the online sales value of liquid infant formula only accounted for 0.01% of overall infant formula sales in Q1, 2017. 
After viewing feedback by mothers on their experience with liquid infant formula, there are three main problems:

  • High cost

The high pricing of liquid IF is regarded as one of the disadvantages which obstruct its popularity in China. In order to find out the price difference, we compared the price between liquid IF and powdered IF. Based on our rough calculations liquid infant formula costs about 2 to 3 times more than powdered infant formula. (price data from JD.com) According to industry expert Song Liang, “the high cost of liquid IF mainly results from the high cost of packaging and logistics”. 

Product (stage 3)Original Price (CNY)Usage for on monthCost for one month (CNY)
PowderedAround 250-300 yuan/canAbout 3-4 cansAround 750-1200
Liquid
(Enfamil from JD official store)
110
(177ml * 6 bottles)
90 bottles (3 bottles/d)Around 1650
 
Liquid
(PediaSure from cbec store)
170
(237ml*6)
Around 90 bottles (3 bottles/d)Around 2500
  • Consumer recognition and Chinese dietary habits

Along with the consumption upgrade, the price may not be the biggest problem now, especially to mothers in first-tier cities like Beijing and China. Chinese consumers have relied on powdered infant formula for 20 years. Concerns related to product quality and safety are holding back liquid infant formula. It’s hard to change consumer purchasing perferences in such a short space of time. 

Besides, although liquid IF can be fed directly at room temperature, Chinese mothers still prefer to warm it before feeding, since they think cool liquids may do harm to their baby’s digestive system. Thus, for these mothers, much of the convenience of liquid infant formula is negated as they still need to warm the baby milk and they are also worried that liquid IF may lose nutrients after being warmed. 

  • Question of product safety, eg, short shelf life

Safety is always the first concern to Chinese mothers. Although liquid infant formula products are as safe as powdered products, and must also comply with the same national product standards e.g GB 10765-2010 [11], Chinese mothers are concerned about product safety particularly shelf life. Even though a product is perfectly safe to feed to a baby before the expiration date, consumers worry about the relative safety of products with only a couple of months remaining before expiration. This is a major concern for manufacturers that will need to be addressed from both a technical and marketing standpoint. 

Outlook for China’s liquid IF industry

Although many enterprises avoid this sector and Chinese consumers also hesitate to accept it, we still think it is a promising sector, which will develop gradually in future for the following reasons.

Favorable conditions

  • Convenient in different consumption scenarios

As the name suggests, ready-to-feed infant formula is convenient for mothers to feed their babies. Doctors also recommend liquid infant formula if mothers fail to produce breast milk after delivering a baby.

Besides, since it is strictly prepared and mixed well in advance by manufacturers, it dispenses with the problem of improper preparation of powdered infant formula by consumers. In addition, here are other consumption scenarios which favor the use of liquid infant formula:

  1. To parents who worked all day long, liquid infant formula is the perfect choice for feeding the babies at night to prolong their rest.
  2. It can encourage fathers to participate in parenting. 
  3. It’s also easy for others to feed a baby (like grandparents, teachers in the kindergarten)
  4. When you travel around with babies, it’s convenient for you to feed them anywhere and at any time.

  • More suitable for babies with weak immune system

Since liquid infant formula is commercially sterile, it is more suitable for babies with a weak immune system. 

  • Rapid growth in 2018

During FBIF 2019, Liu Yubiao, the vice CEO of Ausnutria China shared some data about liquid infant formula. As a new category, it is said the offline sales value of liquid infant formula grew by 5% in 2018. (source: Nielsen)

  • Consumption potential from the post-90s and 95s

As revealed by Mintel’s report in 2018 [12], APAC launches are catching up with Europe which has previously been the dominant region. In the last year, China has seen the third highest number of launches of liquid infant milk formula in APAC following South Korea and Thailand. Due to a busy schedule in daily life, over half of Chinese parents are willing to pay extra for ready-to-feed baby milk. 

On April 17th, Tmall released a consumption report 2019 [13] which revealed that the post-90s generation are the most important segment with regards to birth rate and mothercare. The CAGR of the post 95s’ generation over the past three years is 61%. Dairy expert, Song Liang believes liquid infant formula will perform extremely well in the next several years as it meets the requirement of the post-90s and 95s [14] who are open to convenient and efficient products and tend to turn to expert institutions for help to take care of babies instead of their parents.

In addition, the consumption level of babies’ products develops fast. According to a Tmall report, third to fifth tiers developed rapidly with a growth rate of 11%, faster than first and second-tier cities (growth rate of 9%). The average spending on kids in first and second-tier cities is only 400 yuan higher (per annum) than that of third to fifth tier cities.

  • Meet social demands

Unlike before, more women in contemporary society want to progress their career and personal life. According to a report released by Lean in China along with Yale Center Beijing, etc., 2016 Women, Work and Happiness White Paper [15], 70.32% of women think that both career and family are equally important. Thus liquid IF may be an ideal product for them. Not only can it save preparation time, but also fathers and other available people can help feed and take care of babies together.

A glance at GAC (CNCA) registration of liquid IF manufacturers

Up to now, there are 14 manufacturing facilities that received GAC (CNCA) approval to produce liquid IF products. Among them, Abbott has had 3 manufacturing facilities approved and two of them have renewed their CNCA registration since Jan 1, 2019, which means Abbott is still considering China's liquid IF market as a viable source of future growth. Once an enterprise has a manufacturing facility approved and has received GAC (CNCA) registration, they can enter the market anytime and do not require product registration. Check CL’s f-list: China CNCA-approved Overseas Manufacturers-Infant formula [16].

 ManufacturerNote
BelgiumBelgomilk CVBA /
FranceEven Sante IndustryValid before Dec. 31, 2020
Lactinov Abbeville
 
Renewed since Jan. 1, 2019
Blédina SteenvoordeValid before Dec. 31, 2022
Baby DrinkValid before Dec. 31, 2022
CandiaValid before Dec. 31, 2022
IrelandWyeth Nutritionals Ireland Ltd. Renewed since Jan. 1, 2019
ItalyGranarolo S.P.ARenewed since Jan. 1, 2019
NetherlandsAbbott Laboratories B.V.Renewed since Jan. 1, 2019
FinlandValio Ltd, Turenki production plantValid before Dec. 31, 2023
The USAbbott Nutrition, Abbottlaborat Ories, Columbus Plant Renewed since Jan. 1, 2019
Abbott Nutrition, Abbott Laboratories. (limited to the production of stage 3)Valid before Dec. 31, 2019
Mead Johnson & Company LLCRenewed since Jan. 1, 2019
South KoreaSamyang Packaging Kwanghaewon FactoryRenewed since Jan. 1, 2019

How to help cultivate consumer recognition?

For enterprises considering China’s ready-to-feed liquid infant formula sector they can initially promote products in first and second-tier cities like Shanghai, Beijing, Hangzhou via e-commerce platforms like Tmall and JD.com. According to Tmall’s consumption report 2019, they are the top 3 cities with regard to spending on children's products. 

Cities ranked by spending on children’s products
1. Shanghai
2. Hangzhou
3. Beijing
4. Nanjing
5. Zhoushan
6. Shaoxing
7. Ningbo
8. Wuhan
9. Xiamen
10. Jinhua

Enterprises may also promote and emphasize the safety and convenience of liquid IF at the same time. Designing better packages, placing advertisements in variety shows and advertising by celebrity endorsement may help. Marketing matters as much as product quality. However, a considerable financial and time investment will be necessary to cultivate a change in Chinese consumer preference.

Future of liquid infant formula in China

Liu Yubiao, the vice CEO of Ausnutria China, was interviewed by ChemLinked during FBIF on April 24th. He said Ausnutria is also considering making an investment in the liquid formula sector. According to Liu the biggest stumbling block relates to specific cultural issues related to consumption of room temperature formula

Although the belief that consumption of cold beverages is detrimental to gut health is a deeply entrenched cultural belief in China, it would be easier for young mothers to accept this new product, for young people are now much more open to accept new ideas. KOLs like Doctor Dingxiang have also released popular content refuting more traditional beliefs with titles like “babies can also drink cool water [17]” helping to slowly change Chinese beliefs. 

What will this sector be like in the near future? Zhu Hong, the vice president of Junlebao answered this question during an interview by ChemLinked last year. He predicted that liquid IF would serve as a supplement to powdered infant formula and would be primarily consumed at night or outside the home.

Supplement: Regulations of liquid infant formula in China

  • Forbbiden to be carried or mailed from abroad to China

China is now undergoing a “consumption upgrade”, a term which describes the phenomenon where Chinese consumers have increased spending power and a greater demand for higher quality products. According to reports by CNR (China National Radio), illegal liquid infant formula is frequently seized by customs officials at Chinese ports and other boarder entry locations. For example, Tianjin Inspection and Quarantine Bureau seized more than 130 liters [18] of liquid infant formula mailed from the US in Q2, 2016. On June 28, 2017, Changsha Airport [19] seized 225 kilograms of liquid infant formula. 

Unlike powdered milk, liquid milk is forbidden to be carried or mailed from abroad to China according to AQSIQ Administrative measures on Quarantine of Articles Carried by Entry-Exit Persons [20] and Catalogue of Animals and Plants, and Animal and Plant Products Prohibited from being Carried or Posted into the People's Republic of China [21]

Thus, enterprises can only export them to China through general trade or through CBEC (bonded mode). 

  • Production standard of liquid infant formula

GB 10765 National food safety standard Infant Formula is the only standard offered by Chinese authorities and provides the sole legal basis for the production of liquid IF in China.
For overseas enterprises that want to export products to China, they need to pass GAC (CNCA) manufacture registration but do not need to apply for recipe registration.

  • Will China formulate any liquid IF regulations? 

Unlikely, the market is very small right now.

Reference Link

[1] How to prepare liquid concentrate infant formula
[2] We need ready-to-feed baby formula in Japan!
[3] Japan issued new standards for liquid infant formula
[4] News about liquid infant formula in Japan, the Japan Times
[5] Manufacturers showed little interest in liquid IF, report by Tamahiyo
[6] 2019 Zenith Global Dynamic Maternal Nutrition Market in Asia Report
[7] Baby Food in China, Euromonitor
[8] China's birth rate, the National Bureau of Statistics of China
[9] Gao Hua Securities Limited: the total sales volume of infant formula is predicted to decline 2% in 2020
[10] Online sales proportion of liquid IF, Syntun
[11] GB 10765-2010
[12] Mintel’s report in 2018
[13] Tmall consumption report 2019
[14] Song Liang, liquid IF meets the requirement of the post-90s and 95s
[15] 2016 Women, Work and Happiness White Paper
[16] China CNCA-approved Overseas Manufacturers-Infant formula
[17] Babies can also drink cool water
[18] CNR news: liquid IF seized by Tianjin Inspection and Quarantine Bureau
[19] CNR news: liquid IF seized in Changsha Airport
[20] AQSIQ Administrative measures on Quarantine of Articles Carried by Entry-Exit Persons
[21] Catalogue of Animals and Plants, and Animal and Plant Products Prohibited from being Carried or Posted into the People's Republic of China
 

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ABOUT THE AUTHOR

Lennie Tao

ChemLinked editor, having expertise in food regulations. 

Comments


Great article, keep up the good research Lennie. I wonder when the Chinese government will make ingredients such as Lactoferrin and MFGM compulsory given their established role in infant nutrition and high concentration in mothers milk?
Tuesday, 14 May 2019
Hi, James, Thank you for your comment! As for your question, it is unlikely to approve lactoferrin and MFGM as compulsory ingredients in infant formula, at least in the next five to ten years, for it is not a must to babies according to recent researches, although it is beneficial. You may also find it is not mentioned in the infant formula regulation which solicited public opinion last year. What's more, China is short of the supply of lactoferrin now. The price of lactoferrin is too high... Hope you find this answer helpful. Thank you.
Thursday, 16 May 2019