Chinese Demand for Imported Formula Soars
October 8, 2020
In 2019, China’s infant formula market was estimated to be $27 billion and forecast to increase to $32 billion by 2023, according to Euromonitor. The World Health Organization estimates that just 21% of Chinese babies are exclusively breastfed at six months of age, meaning the remaining 79% receive formula or a combination of formula and breast milk.
Due to rising disposable incomes in China, consumers are now able to afford more luxury items, including formula. USDA reports that China is the largest importer globally of agricultural products, which historically have been bulk commodities.
However, in 2019 Chinese imports of consumer-oriented products overtook bulk commodities for the first time, as consumer demand for high-value products like meat and dairy, particularly infant formula, increased.
After the 2008 melamine scandal, Chinese parents have favored international formula brands over domestic brands. Since then, the Chinese government has implemented additional safety precautions in the infant formula market, but Chinese consumers have been slow to accept the products. In 2008, formula was 28% of China’s dairy imports, per USDA data. By 2019, formula accounted for 45% of dairy imports. Brands from the European Union make up 45% of China’s formula imports, while New Zealand products follow closely with 40%.
Sentiments could be changing, though. Feihe, China’s number-one manufacturer of formula, saw net profits increase 57% year over year in the first half of 2020, and the company hopes to have 30% share of the formula market by 2023. As China’s domestic market grows, the country will need more WPC, lactose, and skim milk powder, which are key ingredients in formula. If the infant formula market grows as predicted, global prices for these product categories could increase. However, as China works toward restoring consumer trust and building its dairy herd, the country’s domestic supply could keep pace with new demand, thereby providing no support to international markets.