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Industry Focus: The Growing Demand for Infant and Young Children Nutritional Supplements

  •   10 Sep 2019
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In recent years, Chinese young mothers especially those in tier-1st and 2nd have become increasingly concerned about the adequacy of their child’s diet to supply the micronutrients essential to foster optimal growth and development. Improvements in consumer dietary education backed by high level government policies has pushed the previously esoteric subject of infant nutrition into the public domain and is precipitating a concomitant increase in interest and demand for infant and toddler nutritional supplements. High level government policies calling for a reduction in dietary related eyesight deficiencies and calls for an increase in breastfeeding rates are fueling interest in products like iron fortified infant foods (we know that infant iron supplies start to run out around 4 months post-partum and that breastmilk is a poor source of iron) and vitamin A and lutein fortified foods (for eyesight).

In the private sector the popularity of social media channels providing nutritional information is also fueling demand in the sector which when combined with advances in trade channels e.g. the continuing developing of cross-border ecommerce (CBEC) is giving Chinese consumers access to an unprecedented volume of information and an unprecedented variety of nutrient supplements sourced from highly reputable manufacturers from around the world. When it comes to infant nutrition in China, unsurprisingly the highly lucrative infant formula sector continues to grab all the headlines primarily due to its sheer scale and profitability, however, in comparison infant and young children nutritional supplements represents an under-exploited segment offering huge opportunities.

From a regulatory standpoint infant and young children nutritional supplements are usually categorized as either health foods or pharmaceutical drugs depending on the labeling claims used and some other factors, although there are some other routes to market such as foods for special medical purposes, foods for special dietary purposes and fortified general foods.

According to Nielsen, in 2017 42% of parents purchased nutritional supplements for the first time when their baby was 0-3 months old, and in 2018 this figure increased to 48%. More than 68% of infants and young children aged 0-6y have taken nutritional supplements.

Additionally, more than 90% of mom and baby stores sold nutritional supplements in 2018. On the Tmall & Taobao platform, the market size of Infant and young children nutritional supplements in January to May 2019 was second only to infant formula in the infant foods sector , which accounted for 14.65% of all sales (aggregate of all infant/children food including infant formula, supplements, complementary food for infants, milk powder etc.), while complementary food for infants accounted for 9.78% of all sales.

The sales volume of many Chinese enterprises in the infant nutrition business sector demonstrates a sustained upward growth trajectory. For example:

  • Sales of Nutri (壹营养) founded in 2016 reached 120 million yuan in 2018;
  • Dain pharmaceutical (达因药业) recorded 100 million yuan in sales in 2018 for their Yikexin brand (伊可新)
  • Angel yeast (安琪酵母) sales revenue reached 500 million yuan in 2018 for the brand of AngelNutritech (安琪纽特).

Major classification of infant and young children nutritional supplements in China

There are 6 main categories of infant and young children nutritional supplements in the Chinese market: probiotics, minerals (calcium iron zinc), cod liver oil, DHA, protein and vitamins.

In offline stores, probiotics, minerals, and cod liver oil are the most 3 popular types which accounted for 70% sales.

In addition, according to Tmall International data, in terms of overall volume of imported baby food, the relative proportions of sales attributable to milk powder have gradually decreased, while the relative proportion of sales of nutritional products have increased rapidly. On Tmall International the most popular infant and young children nutritional supplements are:

  1. Minerals (calcium, iron, zinc)
  2. Vitamins
  3. DHA/walnut oil
  4. Probiotics
  5. Cod liver oil

According to CBN Data, imported brands and products accounted for 90% of all online sales, and almost 100% of vitamins sold were imported products. Bio Island from Australia and CHILDLIFE from US are the top 2 brands. Additionally, supplements designed for children between 6-9 years old were the most important segment by total volume whilst products designed for newborns (between 0-3 months old) were the most important in terms of profits. 

A glimpse of bestselling products online (taken on September 5, 2019)






Note: the price was taken from the best selling one in 3 platforms (Tmall, Kaola and JD) on September 5, 2019.
 

CL Insights

Chance

China has already provided a roadmap for its national dietary guidelines and overall healthcare strategy for the next several years which is articulated in “Healthy China 2030”, a high-level government policy which details various initiatives to tackle China’s most pressing health concerns. Health foods and nutrient supplements are earmarked to play an important role in the plan and as such we expect new opportunities to emerge within the sector.

In July’s CBME exhibition, Biostime said it would roll out a new probiotics beverage designed for newborns in September. It’s estimated by Euromonitor that the Chinese probiotics market will hit a valuation of 89.6 billion yuan in 2022, and by the end of 2019 the infant and children segment of the wider probiotics sector will account for 48.4% of this forecasted valuation (up from 34.8% in 2015).


Challenges

Although overseas brands and products can now leverage the benefits of more open crossborder e-commerce (CBEC) policies (particularly the reduced market entry barriers and regulatory requirements inherent in CBEC) they still need to consider the integration of online and offline sales channels. China has nearly 480,000 pharmacies and over 1 million convenience and specialty stores which are still the dominant retail and trade channel particularly in lower tier (3rd and 4th) cities. Use of these “brick and mortar” offline retail channels are still contingent on enterprises complying with China’s often strict regulatory requirements (particularly for health foods and pharmaceutical drugs).

Another consideration is that despite the relative novelty of these infant and children nutritional supplements and the relative underdevelopment that hallmarks the sector there is still serious challenges and competition within the sector. According to the most recent data, there are already over 2,000 domestic infant use nutritional supplement products circulating on the market, not to mention the increasing number of international products. Similar to the closely related infant formula sector, infant and nutritional supplement manufacturers shall place top priority on safe production and ensuring a high quality and consistently safe product is delivered to consumers.

Disclaimer: all images are taken from the internet.

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ABOUT THE AUTHOR

Chris Wang

Senior research analyst at ChemLinked, focuses on market and regulatory intelligence in China, especially for imported goods: dairy products, health foods, pet foods, cosmetics, etc.

LinkedIn profile: https://www.linkedin.com/in/chriswang2014/