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“Demand for infant formula

in China “

MARCH, 2016



TABLE OF CONTENTS

1.0 CHINESE BABY FEEDING PATTERNS

• CHINESE BABY FEEDING PATTERNS IN

COMPARISON TO THE RECOMMENDED DIET

• CHINESE MARKET IS A MAJOR STAKE FOR

INTERNATIONAL BRANDS

2.0 SOCIAL MEDIA PLATFORM INFLUENCE

• TOP BRANDS FAVORED BY CHINESE

CONSUMERS

• REPUTATION ON SOCIAL MEDIA INFLUENCES

BRAND IMAGE AMONG CHINESE CONSUMERS

3.0 IMPORTED BRANDS SCANDALS

• CASE STUDY: FONTERRA CONTAMINATION

INCIDENT AFFECTED ITS RELATED BRAND

REPUTATION IN CHINA

4.0 DECREASE IN BIRTH RATES IN CHINA

• CONTINUES DECREASE IN BIRTH RATE

• DIRECTLY AFFECTING DEMAND FOR INFANT

FORMULA IN CHINA



How are babies fed in China?

0 Month 12 Month 18 Month6 Month 24 Month 30 Month 3 Years Old

Recommendedby World Health Organization

Chinese feeding pattern

Homemade baby food supplements

Baby food supplements

Infant formula Adult food

Breastfeeding



Chinese market is a major stake for international brands

World Health Organization (世界卫生组织) recommendations:• Infants (newborn to six months) should

primary be breastfed• Toddlers (six months to three years old)

should consume baby food supplements

Chinese feeding patterns:• Infants (newborn to six months) consume

a combination of breastfeeding and infant formula

• Toddlers (six months to three years old)consume a combination of infant formula and homemade baby food supplements

• Chinese kids usually begin to consume adult food from the age of three

These feeding patterns make Chinese parents a major target for brands. Thus entering and expanding the market for infant formula in China is on the top of the to-do list of many infant formula manufacturers. The market for infant formula in China is currently larger than ¥60 billion and gradually growing. Many infant formula companies are aiming for a share of this large consumer market.



Wyeth 惠氏奶粉Abbott 雅培奶粉

Firmus 飞鹤奶粉

Karicare 可瑞康奶粉

BeingMate 贝英美奶粉

Nestle 雀巢奶粉Dumex 多美滋奶粉

Nutrilon 诺优能奶粉Friso 美素佳儿奶粉

Yili 伊利奶粉China

China

China

USA

USA

Holland

Holland

France

Switzerland

New Zealand

2.

9.

8.

5.

7.

6.

4.

3.

10.

Top ten brands of infant formula favored by Chinese consumers



Geographic location of top ten brands of infant formula favored by Chinese

• Recent statistics show that Tencent QQ and Wechat (In Chinese 腾讯QQ与微信) have over six hundred million active users. Weibo (In Chinese 新浪微博) have over two hundred million active users

• In order to perform well in the consumer market in China, online channels are crucial for both domestic and international brands

• Bad operations by companies will be relayed and commented on social media platforms, hence, deeply modify Chinese consumers’ purchase habits



Attractiveness of imported brands threatened by scandals

• Fonterra (In Chinese 恒天然): One of the world’s largest producers of dairy products

• The 2013 Fonterra contamination incident dramatically hurt the image of its product segment

• In 2012, the year before Fonterra’s contamination incident, a large part of China’s US$1.9 billion import formula milk originated from New Zealand

• Incident like this dramatically disturbed the image among Chinese consumers and decreased their confidence towards related products

Case Study



Attractiveness of imported brands threatened by scandals

• A survey was conducted on one of the most popular social media platform in China, Sina Weibo (In Chinese 新浪微博) in relation to the consumer confidence after the incident

• Out of the 43,000 respondents, almost 80% of the respondents indicated they would not purchase the affected products after the incident

• This indeed affects the import of New Zealand infant formula in 2014 with a decrease of over 30% in import quantity in comparison to the year before

Case Study



Suspect decreasing demand for the market of infant formula in China

• This is closely linked with the number of newborns in China.

• According to some experts, this relaxation should enable 10 million incremental births by 2018.

• But on the contrary, the newborn population has never excessed 180 million since 1992.

• In the recent ten years, the newborn population has changed between 150 to 160 million each year and the expected “baby boom” around 2010 never hit.

With the aging population, the Chinese government is pushing for an increase in birth rate which led to the scrap of the 30+ year policy. However, the result of the previous attempt to relax the “One Child” policy for parents who are a single child (In Chinese 单独二孩政策), did not perform well. This relaxation was applied over two years, but results have been disappointing. Up until 2015, China has over 110 million couples who fits the relaxation criteria, however, only 16.9 million couple applied, i.e. around 15%. The newborns in China in 2015 is 165.5 million.

Birth Rate of China



Indeed, many factors point to the fact that China’s birth rate is not increasing.Therefore, it is realistic to not be too optimistic about the result of the new policy “Universal Two-Child Policy” (In Chinese 全面二孩政策). With suspected decrease in birth rate in China, it is still wise to expect a decrease in demand for the market for infant formula in China. Clearly, China has an overall population advantage over most of the other countries and the demand is a lot more than those countries, but in comparison to the past years, the domestic demand for infant formula is expected to decrease.

Suspect decreasing demand for the market of infant formula in China



• Chinese baby’s feeding patterns make the market for infant formula in China a prosperous market

• Online appearance is crucial for domestic and foreign brands, both heavily influence the purchasing behaviour of Chinese consumers

• Suspected decrease in birth rate in China over the next few years hence will lead to a decrease in the demand for infant formula

Key Points:



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