Feihe Granted the First Manufacturing Permit of Lactoferrin in China

On May 24, 2022, Feihe delivered an article via its WeChat Official Account, announcing the acquisition of the first manufacturing permit of lactoferrin in China. It signifies China’s first automatic production line for lactoferrin will be in production.

Popularity of lactoferrin in China’s infant formula market

Lactoferrin is a component in breast milk and is regarded to be part of the innate immune system, and to exert anti-microbial activities owing to its iron-binding capacity as well as by other mechanisms. Just like other ingredients such as OPO, formulators attach great importance to taking the advantages of lactoferrin to achieve the closest imitation of breast milk.

In 2016, Mead Johnson launched “Enfinitas”, a series of infant formula containing lactoferrin, which soon got popular on the market. Afterwards, more and more enterprises, such as Yili, Feihe, Beingmate, Junlebao, etc., chose to add lactoferrin into their high-end products due to consumers’ need of high-quality products. Just as what described by Nutrition Insight, the premiumization trend of infant formula in China made lactoferrin become a unwritten market standard for the sector. In 2021, 50% of lactoferrin’s global production was used in China. Song Liang, a dairy expert in China, expressed that around 40% of registered infant formula products in China had used lactoferrin in their recipes.

Urgent need to improve the self-supply rate of key dairy raw materials in China

However, there is a hidden danger behind such a huge market for China to consider, which looks quite optimistic and promising. It is that currently almost all the lactoferrin in China are imported from overseas countries.

In 2017, China increased the stringency of lactoferrin purity requirements from 90% to 95%. The price of lactoferrin soon skyrocketed accordingly, starting at 2,000 yuan/kg to 30,000 yuan/kg in 2018. In practical terms, the 5% increase represents a significant technical challenge for manufacturers and has forced many lower technical capacity manufacturers to exit from the market, which resulted in a significant decrease in the overall supply and the consequent increase in price. Since China supervises the safety and quality of infant formula by recipe registration, if enterprises choose to manufacture the products without lactoferrin, then the enterprises should alter their previous recipe registration (a potential time consuming, costly and complicated procedure) and this could mean alienating their existing consumer base. Otherwise, they need to reduce their profits by absorbing the increased costs themselves or alternatively pass these costs on to consumers. According to a researcher from Ministry of Agricultural and Rural Affair, at least ten manufacturers has stopped their production of infant formula due to the shortage of lactoferrin.

The price of lactoferrin later gradually reduced to 10,000 yuan/kg in 2020 as indicated by Beingmate. However, the outbreak of COVID-19 increased the risk in the supply chain due to the anti-pandemic measures worldwide, which influenced the speed in supply chain and increased the logistic cost. As China highly relies on the importation of key raw materials such as whey powder, lactoferrin, lactose, etc., the high dependence on imported key raw materials is a risk for the sector to pay high attention to, especially when infant formula is vital for babies.

In China’s Two Sessions 2021, both Leng Youbin (chairman of Feihe) and Shi Yudong (R&D Engineer from Mengniu) mentioned that China should establish a dairy industrial chain security mechanism. Leng Youbin suggested that the competent authority should support dairy manufacturers in developing the upstream industry and place more emphasis on dairy’s deep-processing, so as to develop high value-added ingredients. In the beginning of 2022, Feihe together with other institutions (e.g. Jiangnan University) joined a national project and conducted the research on the preparation technique of key ingredients in infant formula, etc.

ChemLinked believes in the future, China will focus more on increasing the self-supply rate of such key ingredients, resulted from both the intention to reduce supply chain risk and the purpose to build a competitive dairy industry.