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Goat Milk Powder: Next Growth Market for China’s Infant Formula Sector

  •   4 Dec 2018
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According to data derived from China Goat Milk Powder Industrial Development Research unveiled in September 2018, the market size of infant formula goat milk powder keeps increasing, boasting an annual growth rate of over 30%, and it is expected to reach 10 billion yuan by 2020. Due to the relative scarcity of raw materials, epidemiological differences in lactase deficiency in Asians, increasing awareness of cow’s milk protein allergy and other reasons, goat milk powder is now regarded as a high-end product in China.

The goat milk powder sector in China began to gather momentum in 2008 with the commercialization of new goat milk powder deodorizing technology. Early sales were modest and total value was just 0.2 billion yuan. By 2014 the market valuation had climbed to 3 billion yuan and by 2017 it had reached a staggering 7 billion yuan. The success of China’s goat milk powder sector began attracting the dairy sectors big players with companies like Ausnutria, Feihe, Synutra, Yashil all launching their goat milk powder products in China. Currently Kabrita of Ausnutria Dairy is one of the most popular goat milk powder brands among Chinese consumers, its sales value hitting 1.3 billion yuan in 2017.

The consumption upgrade (a term used to describe the affluence and propensity of Chinese middle class to purchase higher end consumer products) is one of the leading factor for the rapid growth of goat milk powder. In addition, goat milk powder offers some key nutritional advantages when compared to cow milk powder which are enticing for Chinese consumers. For example, goat milk contains higher level of unsaturated fatty acids, and is thought to offer a more balanced vitamin and micronutrient profile. Besides, the protein structure of goat milk is more similar to that of breast milk and is easier for some babies to digest.

Restriction of goat milk powder market

Although the goat milk powder market has expanded rapidly over the course of the last several years, cow milk powder still dominates the infant formula market, representing 90% of all sales. Availability and access to raw materials and market environment are both the leading factors that restrain the development of goat milk powder market in China.

  • Raw material shortage

Goat milk shortage is a universal problem for manufacturers around the world. Farming practices involving goats is not supported in some European countries due to detrimental impact on the environment primarily associated with severe damage to local flora. According to China Dairy Quality Report-2017, China produced 36 million tons of cow milk, while only 1.1 million tons of goat milk. The goat milk yield in Shaanxi province (the major goat milk production basement in China) is 600 tons/day, however, the daily consumption of a big enterprise may reach over 300 tons, and there are at least 8 enterprises with this capacity.

In addition, goat whey powder, another significant ingredient for goat milk powder, is also in great shortage.

  • Lack of “market leader”

Before the implementation of China’s infant formula registration policy, more than 20 manufacturers producing over 200 goat milk powder brands were competing for sales in China’s goat milk powder market. However, there is still no obvious “market leader” for this sector, even though well-known enterprises like “Herds” and “Meiling” are operating in the sector, neither of them is clearly differentiated from their competitors in terms of product quality or brand reputation. Due to the lack of a clear leader the goat milk powder sector offers little in the way of product innovation or differentiated quality.

Future trend for goat milk powder

Undoubtedly there is great potential for the development of China’s goat milk powder sector, and more enterprises are planning to step into this area driven by the huge profits on offer. Increased competition in this sector will inevitably lead to following 3 trends:

  • The upcoming price war will lead to lower product price

Up to now, 49 enterprises have been granted registration approval for 257 goat milk powder recipes. After obtaining the permission to enter the Chinese market, enterprises are more confident to roll out their marketing strategy and obviously price will be a focus. The dairy analyst Song Liang predicted that the price war will be triggered in 2019, and the price for goat milk powder will be lower in the next few years.

  • The product quality will be further improved

Enterprises boasting premium resources will accelerate their product upgrade and innovation, and there will be more and more high-quality products appearing in the market, such as “100% goat milk powder (means that all the food ingredients are made from goat milk). Due to the shortage of raw materials, it is common for manufacturers to add bovine whey protein in their goat milk products. However, as the “Administrative Measure for Infant Formula Registration” stipulates that the animal source of all dairy ingredients as well as the ingredient percentage of each animal source (when there are over 2) shall be indicated on label, enterprise can gain a competitive edge by launching a “100 % goat milk powder” product. Furthermore we can also foresee products using both “organic” and “100% goat milk” labeling claims.

Additionally enterprises need to realize that consumers nowadays are more rational and pay more attention to price. A high price is only acceptable when the product offers premium quality and is supported by state-of-the-art ingredients and production technology.

  • Consumer service will be a key point

Looking back on the development of high-end infant formula products in China, initially enterprises realized product differentiation through their packaging and labeling. The next phase involved the use of new food ingredients such as GOS, OPO etc. The latest phase sees enterprise trying to achieve product differentiation through the use of premium and rare food raw materials, including organic milk and goat milk. When the product quality reaches the upper limits of what is technically possible (within the constraints of Chinese infant formula product standards), consumer service will become an essential part of an enterprise’s offering. Due to the consumption upgrade, consumers would like to have a more personalized service, interactive experience, and sense of participation. In order to meet these new demands, enterprises will need to increase their overall offering and services and include things like parenting solutions, balanced meal plans for babies etc.

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Yilia Ye

ChemLinked editor, having the expertise in food regulations, Chinese import-export policies. 

LinkedIn profile: https://www.linkedin.com/in/yiliaye/