No milk formula left behind

BRAKES may have been applied on population growth in China, but milk formula remains the fastest growing category in the world’s second largest economy.

Oksana Malynovska, head of Industry Research at Euromonitor International, said major manufacturers like Nestlé, Danone, Mead Johnson and Abbott are pitching their products to middle-class parents who want only the best for their offspring.

“Even though the one-child policy is constraining the Chinese birth rate, these milk formula manufacturers have successfully leveraged the attention and money that Chinese parents lavish on their little emperors to convince them that milk formula is really good for their babies,” Ms Malynovska noted. “These same manufacturers are also still capitalising on the 2008 melamine crisis to justify their higher prices relative to locally produced items. This is in turn driving sales not just by retail volume but also retail value.”

Toddler milk formula is growing well in particular, as international players extend the age range for milk formula up to toddlers aged 2, 3, 4 and even 5+ years and play up the value added features of their products. “Hence manufacturers are still growing their target consumer audience,” Ms Malynovska pointed out. “It’s also keeping a growing number of parents from switching to more traditional dairy products, like cow’s milk, and manufacturers have been very good with promoting the nutritional/functional health benefits of toddler milk formula relative to normal dairy.”

“All of this speaks to the potential selling power of health and nutrition across the wider packaged food industry, especially when it comes to the growing ranks of middleclass parents in China – and elsewhere in the region – who can afford to spend extra for this kind of thing,” she also said.

That said there are some potential hurdles for the short to medium term for the milk formula sector. “One is the fact that the Chinese government is starting to crack down on milk formula product claims, compelling manufacturers to state that breastfeeding is still best. It’ll be interesting to see how this impacts growth going forward,” she explained. “Also, even the international players are having some problems when it comes to ensuring product quality.”

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