Why does China’s Complementary Baby Food Market Remain Bright for Foreign Brands?

Complementary baby food, is a significant sector like infant formula that foreign businesses value and dominate in China. During the 6th China Special Food Conference, experts gathered to analyze the status quos and share the latest industry dynamics of China's complementary baby food sector. Enlightened by experts' insights, ChemLinked summarizes reasons why China is a bright market for stakeholders to explore, also highlights the directions where the market opportunities lie. 

Market Appeal of China's Baby Food Segment 

1. The huge demands catalyze a massive market 

An enormous market can be generated based on the immense population, as well as the rising consumer power. The rule runs well especially for complementary baby food. On the one hand, according to the statistics, the number of newborns in China reached 12 million in 2020, which was equivalent to the total population of Belgium. Only five years after the ending of one-child policy, China decided to embrace the three-child era. Predicated by CITIC Securities, the new birth policy is expected to increase the number of new births by about 10% in the short term, which can boost the demand for baby products. On the other hand, along with the steady-going economic growth, Chinese consumers are gaining robust purchasing power. China's remarkable economic recovery from Covid-19 also spurs consumer confidence. Given the favorable conditions, experts expect the market to grow to over 70 billion in 2025, at a CAGR of 10%.

Data source: Data Insider Consulting

2. Younger parents pay high attention on baby foods 

The improvement of living standards leads young parents in China to show increasing care about complementary baby food, which is crucial for the well-being of their next generation. On popular online media like Tiktok and Toutiao, statistics show that complementary baby food tops all the search terms in the maternal and child sector, mirroring the striking amount of attention the market has attracted. 

TOP 10 Search Terms in Maternal and Child Sector in 2020Q1

* Data source: Ocean Engine

The high attention has been translated well on the consumption of baby products. Surveys show that compared with the post-85s parents, Gen-Z parents tend to spend more in maternal and child products. Gen-Z parents' expenditure on these products even accounts for 30% of the total monthly household expenditure.

3. Imported baby food is still preferred 

As revealed by the nationwide survey conducted by China Nutrition and Health Association in 2020, in terms of choosing baby food, the top three factors that consumers value most are food safety, nutritional composition and brand reputation. Additionally, more than 76% of respondents admit that they care about the choice of brands. When comparing domestic and imported brands, more than half believe that there does exist a gap in product quality between them. This impression is exactly manifested in their market choices. Based on a poll with over 150,000 votes, phb123.com¹ published the list of top 10 brands in China's baby food sector. Imported brands showed their dominance by occupying six spots.

Furthermore, according to the report from Kantar Worldpanel, the high-end trend has become an important feature of China's baby food market. At present, the average unit price of complementary baby food has risen to 139.64 RMB, with an average annual growth rate of 6.9%. Imported brands are usually deemed higher-end in China. Therefore, they have been benefited from this trend, and will continue to be.

Market Opportunities for Imported Brands

1. Better diversity of product portfolio fits the demand 

Compared with western countries, China's complementary baby food industry started lately, which may be the ultimate cause of Chinese manufacturers are struggling with product diversity. According to the survey mentioned above, cereal complementary baby food is the most common category with the most production volume on the Chinese market, in which the proportion of baby rice flour exceeds 60%. On the contrary, canned baby food has the least production volume. Although as a convenient food suitable for infants and young children, canned baby food is only produced in five factories in China, leaving the market segment far from saturated, which means there's a lot of space for global brands to make canned baby food grow in China.

Data collected by China Nutrition and Food AssociationData collected by China Nutrition and Food Association

In addition, the survey reveals that nearly 80% of the respondents believe that product diversity is the first factor to attract consumers. Yin Shian, an expert from China Nutrition and Food Association, pointed out that foreign brands usually have better diversity of product portfolio and can better meet the market demand for different types of products. Expanded their business to China long time ago, many global brands have known well about the market. Like Nestle and Heinz, they reaped the market by the early cultivation. The way those successful brands lay out their product lines can enlighten the new comers.

2. Online shopping meets the new trend of consumption habits 

For foreign brands, the difficulty of offline distribution is much higher than that of local manufacturers, therefore developing their business through Cross Border E-Commerce (CBEC) platform is the prime choice. According to the survey in 2020, 57% of respondents choose to buy complementary baby food through online channels. Moreover, up to 70% are willing to purchase from e-commerce channels. During the covid pandemic, 56% of consumers switched from offline purchase to online purchase of all or part of baby food.

When it comes to product category, respondents believe baby snacks, such as soluble beans, biscuits and yogurt, are what they tend to buy online, which makes sense because snacks have a wide variety and may be absent from offline shop shelves. To sum up, expanding business via CBEC with a variety of products may win yourself more opportunities.