Five Influences that China’s Promotion Action Plan of Dairy Quality and Safety will Bring Forth

China SAMR released a “Promotion Action Plan of Dairy Quality and Safety ^[1]” on Dec 30, 2020. As a supplement document to “Opinions on Promoting the Revitalization of the Dairy Industry to Guarantee the Quality and Safety of Dairy Products ^[2] (raised by the State Council in 2018)”, this action plan gave specific instructions for goals, tasks, measures, etc. that needed to be accomplished in the following three years.

Goals by 2023

• To optimize the legal system

By 2023, China will revise “Regulation on the Supervision and Administration of the Quality and Safety of Dairy Products ^[3]”, “Administrative Measures for Registration of Infant and Young Children Milk Powder Formula Recipes ^[4]”, national standards for raw milk, sterilized milk, pasteurized milk, infant formula, detailed rules for dairy production license review (influencing domestic enterprises), etc., and optimize the standards for processing techniques and test methods.

• To improve the supervision capability

The production license review of both dairy and infant formula manufacturers will be intensified. To domestic infant formula, the production review will focus on the consistency between the manufacturing conditions with the registered content.

As for the recipe registration, China will revise “Administrative Measures for Registration of Infant and Young Children Milk Powder Formula Recipes (see consultation draft in 2019)” and clarify the situations where the application will be rejected. Furthermore, the authority will strengthen the review of the scientific evidence, safety evidence and R&D report of infant formula, and intensify efforts in on-site inspection and sampling inspection. 

• To further develop the quality and safety management system of dairy manufacturers and to enhance the proportion of self-established or self-controlled milk source

As a key task to improve dairy quality, China will urge enterprises to reinforce the whole-process control, e.g. strengthen the management of milk source, enhance the proportion of self-established or self-controlled milk source, conduct the pasture review, fortify the management and control of raw/auxiliary materials, etc. Infant formula manufacturers should also conduct a regular self-check of the quality management system and submit the self-inspection report. Group companies should conduct the self-check of their subsidy manufactures.

Detailed goals are listed below:

• To strengthen the development and research ability, better the product structure and advance the production technique

The government supports enterprises to produce new products with new technologies and techniques, encourage enterprises to manufacture dairy products with raw milk and aims to increase the further development and research of products like cheese and butter.

• To foster consumers’ confidence

The authority will release the sampling information regularly and actively promote the product improvement achievement. Dairy manufacturers can also organize activities to welcome the public to visit the facility and educate the public about the nutrition knowledge of dairy, etc.

Five Influences this Plan Brings

First, wet processing will be a trend in the near future since manufacturers are encouraged to use raw milk as the raw material during the dairy manufacturing, instead of milk powder. Compared to dry processing, products under wet processing have a balanced nutritional component and can reduce the secondary pollution of milk powder, etc. However, the limitation is the factory should be close to the milk source to get the fresh milk and China now simultaneously advocates for enterprises to expand their proportion of self-established or self-controlled milk sources.

Second, the increase of self-established or controlled milk source will also benefit the guarantee of dairy safety and quality. Huge enterprises like Feihe, Ausnutria, etc., have started their overseas purchasing in past years. In the long term perspective, the increase in self-controlled milk source and encouragement of using raw milk as the raw material may influence the business of trading basic dairy powder to China. But at this stage, product cost still matters. Moreover, to domestic enterprises in the southern part of China, who are without their own milk source, milk powder is still a must.

Third, cheese and butter sectors are welcoming this favorable government support and will continue to grow fast in future. In 2019, cheese and butter account for the minority of the overall dairy consumption. However, considering the annual growth rate of cheese (19.7%) and butter (16.9%) from 2000 to 2019, Chen Guangyan, deputy director of special committee on dairy nutrition and consumption, anticipated that there would be a rapid growth for the cheese and butter market in the next 15 years. (View more at CL analysis ^[5])

Fourth, consumers’ trust in domestic brands is expected to increase with the positive publicity from the government. As we know, how to gain consumers’ trust has been a major concern to China’s dairy industry in the past years. In recent years, we have seen domestic companies’ efforts to combat that. For example, companies like Feihe and Junlebao have conducted activities where the public can visit the manufacture to see the production process. On August 7, 2020, Feihe displayed its facility and the manufacturing process via live-streaming and got over 180 million views. 

Fifth, the recipe registration of infant formula will be stricter in regards to what was pointed out in this Plan and the disclosure of the consultation draft of “Administrative Measures for Registration of Infant and Young Children Milk Powder Formula Recipes” in 2019. Moreover, in 2022 we will see the second wave of infant formula recipe registration. This is due to the first batch of infant formula that was registered in 2017 will need to apply for the recipe certificate extension in 2022 (the valid period for the recipe approval is 5 years). To enterprises that want to extend the valid period, they should submit the application 6 months before the expiration date. ChemLinked predicts that China will release the recipe registration measures perhaps in 2021 and will be even stricter with the infant formula registration in 2022. Since China is raising higher quality and safety requirements to entrants, some companies will be inevitably phased out during this second recipe registration wave.