China IF Sector in 2019: New Product Releases, Landmark Events, and Registration Updates

At the start of 2020, the National Bureau of Statistics announced a slowing in the decrease in China’s birth rate in 2019. Total births still fell by 580,000 from 2018 numbers to 14.65 million. The main reason for the decline is that China’s primary childbearing demographic (20 – 29 year olds) fell by more than 6 million. Declining birth rates, increasingly fierce market competition and regulatory compliance obstacles made China’s infant formula market a challenge to operate in. During 2019 we saw greater category differentiation, accelerated product innovation, and trends towards segmentation, all driven by higher demands for premium and ultra-premium products.

New releases

In 2019, products that utilize organic ingredients, goat's milk, A2 beta-casein protein were trending, and many enterprises launched new products in these segments. The most prominent one was the A2 beta-casein protein. The success of the a2 Milk Company, the pioneer of A2 protein milk powder in China, has attracted many players looking to align with this trend.

Landmark events

1. On May 23, 2019, the National Development and Reform Commission of China (NDRC) issued the Promotion Action Plan of Domestic Infant Formula Milk Powder. The action plan outlines China’s industry development roadmap in relation to improving the quality, competitiveness, and reputation of China’s domestic infant formula.

2. On June 27, 2019, SAMR solicited public opinions on the revision of Administrative Measures for Registration of Infant and Young Children Milk Powder Formula Recipes (2016). This administrative measure applies to both domestic and overseas infant formula enterprises and imposed registration requirements on all infant formula products imported or sold through general trade or retail channels.  

3. On July 1, 2019, Mengniu announced the sale of its 51% stake in Junlebao. The delivery of transferred equity was finished on November 19, 2019.

4. On August 1, 2019, Yili completed the acquisition of Westland, New Zealand's second-largest dairy co-operative.

5. On September 16, 2019, both Mengniu and Bellamy’s released notices to disclose Mengniu’s planned acquisition of Bellamy’s. The total value of the deal announced by Mengniu was no more than $1.46 billion (7.104 billion yuan). Later on November 25, Mengniu announced the acquisition of Lion Dairy & Drinks, an Australian Dairy and beverage company.

6. On November 13, 2019, Feihe (Firmus) Limited, China’s leading domestic infant formula manufacturer (assessed by total sales value), successfully listed on the Hong Kong Stock Exchange.

7. On December 24, 2019, Bright Dairy announced that it purchased the assets of Huishan Dairy for 751 million yuan ($107 million). Huishan Dairy is a longstanding enterprise based in northeast China and was listed on the Hong Kong Stock Exchange in 2013. The company was delisted on December 23.

8. At the end of 2019, Feihe (Firmus), Junlebao, Biostime, and Ausnutria, which are defined as China's New Top Four major infant formula brands, have all raised their product prices.

Infant formula recipe registration updates

In 2019, China approved the registration of 86 recipes, 24 were imported infant formula - the Netherlands (18 recipes) and Denmark (6 recipes). Many enterprises launched high-end products like organic and goat infant formula because of the excellent market performance of these two segments. In 2019, a total of 12 goat infant formula recipes were registered, accounting for 14% of the total number of registrations. Among the 12 registered recipes, 9 were domestic products, and 3 were imported products.

In 2019, a total of 9 organic infant formula recipes were registered, accounting for 10% of the total. Among the nine registered recipes, there were six domestic products and three imported products. 

Ranking of enterprises by approved recipe number in 2019

Ausnutria ranked NO.1 with 12 recipes registered.

Number of approved recipes in different age groups

Despite the negative impact on the sales of stage 1 (0-6 months) milk powder due to falling birth rates and rising rates of breastfeeding, stage 1 infant formula recipes were the most registered.