China’s infant formula market – a continuing growth story

China imported more than 90,000 tonnes of infant formula in 2012. As can be seen from the graph below, The Netherlands was the No 1 exporter at about 20,000 tonnes, followed by New Zealand, France and Singapore with 15,000 tonnes each.

Ireland along with Denmark and Australia had direct imports of 4,500 to 5,000 tonnes each. Exports through Hong Kong from Ireland were 6,500 tonnes and most of this is destined for mainland China also. Local infant formula production stands at about 350,000 tonnes.

In response to recent food safety scares, the Chinese Government plans a radical restructuring for the domestic baby milk powder industry. It plans to rationalise the industry from 127 players currently to around 50 by 2018. T

his has major implications for Irish suppliers of ingredients into those players. Currently the top 10 brands (which includes imported brands) have a 45 per cent market share. This is expected to grow to 80 per cent by 2018.

The sector is expected to grow by six to eight per cent per annum into the medium term, especially if China relaxes its one child policy later this year or in 2014.

These figures don’t include the considerable exports of dairy powders (in 2012 exports of SMP and Whey amounted to 1,200 and 14,600 tonnes, respectively) from Ireland into the Chinese infant formula sector that has the potential to grow strongly post 2015.

The rationalisation of the sector and what this means for individual infant formula manufacturers in China is a key challenge to Irish suppliers. Early in 2014, Bord Bia plans to carry out research on the implications of this policy and which players are likely to be around for the longer term.

By Michael Hussey, Food & Beverage Division, Bord Bia – Irish Food Board