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Growth of China infant milk formula market to be halved to 7 to 8%, survey shows
Online Edition
GROWTH rate of China's infant milk formula will only be half of the double digit pace recorded in the past decade, due to slower economic growth and high raw material costs, a latest study shows.
Compound growth rate of China's infant formula market will be around seven to eight percent for the next five years, compared to more than 16 percent in annual growth between 2000 and 2013, Rabobank said in an industry report.
There are still positive drivers for the industry, including relaxation of the one-child policy and continuous investment from different players in the market, as well as improved distribution network into lower-tier cities and rural areas.
"The easy money in the infant formula has already been made and domestic and foreign companies are making strategic shifts to tackle the challenge under the new market normal," Sandy Chen, senior industry analyst at Rabobank, told a press briefing in Shanghai yesterday.
High end products will enjoy better growth opportunities in the future, with more families willing to pay for premium products.
China has been driving industry consolidation, hoping the top 10 biggest infant formula companies to make up 65 percent of the market share by the end of this year. The target would be hard to achieve, according to Chen, due to relatively strong foothold by foreign players.
A number of domestic dairy companies are making outbound expansion to secure high quality raw material supply, and foreign players are also strengthening local partnership to gain market access and defend their existing position.
The addition of about 410,000 tons of new infant formula production capacity by 2016 by Chinese companies in both local and overseas manufacturing sites will further fuel competition in the crowded market, Chen added.
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