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Industry Focus: 10 Key Forces Shaping China’s Infant Formula Sector in 2019

Looking back at 2019, opportunities in China's infant formula sector have been inextricably linked to major challenges, mostly in the form of regulatory obstacles. As the disruptive influences of technical barriers to trade continue to shape markets, we have seen several companies fall by the wayside. The supply vacuum created in the wake of their market exit has also been quickly filled by market-ready enterprises which have tended to benefit domestic companies. Competition between domestic and foreign brands continues to heat up and is forging greater category differentiation and stoking the fires of innovation.

As opportunities in tier 1 and tier 2 cities dry up, low tier cities still offer major potential and are now driving growth in the sector, albeit primarily for domestic enterprises. Demand for premium and ultra-premium products is still driving product development towards greater segmentation.  Products that utilize organic ingredients, goat's milk, A2 beta-casein protein, various optional active ingredients like OPO, pre- and probiotics and lactoferrin are all trending strongly but a race to the top has ensued and premium and ultra-premium products now dominate.

The market reformation strategies and industry development blueprints of the last several years are bearing exceedingly juicy fruits for China's government as several enterprises are now pulling in revenues in excess of 5 billion per annum, championed by domestic giant Feihe (Firmus) who is now challenging international companies and setting its sights on the top spot in China's IF sector.

Here are the top ten trends in China's IF sector in 2019:

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