Organic products ‘driving growth’ in Chinese infant formula – study

New research from Mintel shows signs of promise in China’s infant milk formula category, with volumes being driven by its emerging middle class and the decision to phase out the country’s so-called ‘one-child policy’.

Mintel has predicted that infant formula volumes will grow by 5.4% between 2016 and 2021, with organic options set to be one of the fastest-growing areas. It’s now estimated that 75% of Chinese mothers feed their babies organic infant formula, as the quality of products and the amount that parents will spend on their children’s nutrition
continue to be key determinants in consumer purchasing behaviour.

Younger mothers in particular are interested in organic formula options, Mintel said, with 79% of mothers aged 25-34 using products of this kind.

China’s new middle class also ‘over-indexes’ on organic infant formula usage, with nearly nine in ten saying that they use these products – a significantly higher proportion than consumers overall (72%).

Mintel research found that half of mothers choose organic infant formula because they are willing to pay more for their baby’s food. This is also the main driver for them to choose niche products, such as goat milk infant formula.

By abolishing its ‘one-child policy’, which was phased out in 2015, China has opened up further room for growth within the infant formula category. Fewer people will face impositions on the number of children they can have, after the policy generally failed, meaning potentially wider demand in the coming years.

Analysis: ‘a strong market for infant formula’

The opportunities for foreign dairy brands to perform well in Asia – particularly China – are well-documented. Ever since the country’s melamine crisis in 2008, consumer confidence in domestically produced dairy has been insurmountably low. Chinese companies like Yashili and Yili have sought to reduce their losses by investing in Australian and New Zealand-made infant formula, while European companies like Danone have capitalised on favourable perceptions of their brands.

Mintel’s latest research has shown that – as well as provenance – the nutritional quality of infant milk formula is an important motivator for Chinese consumers. The ‘organic’ label brings with it the perception that a product is better – and crucially, safer – for children. Nearly 60% of Chinese mothers think that products from Australia or New Zealand are better than those from other milk sources, while less than a fifth associate Chinese milk with a premium image.

The country remains a strong market for infant formula, driven by product innovation and a preference towards imported products. Food safety remains a key motivator for Chinese consumers, especially when it comes to their children.

Mintel also found that liquid infant milk formula, popular in the west, is yet to gain awareness in the Chinese market. Research from the Mintel Global New Products Database showed that the UK and US led in liquid infant milk formula activity with 41.7% of launches in 2016, while there were none launched in China.

Cheryl Ni, food and drink analyst for Mintel, said: “Our research indicates that high-end and niche baby food and drink products have great potential in the Chinese market. Organic infant milk formula has experienced a high adoption rate, indicating that consumers with more spending power are willing to pay a premium for products they perceive to be better for their infants. Premium infant milk formula products will become the focus of leading companies who meet infant formula registration measures. Brands need to identify the right way to communicate with mums, to probe into their needs in real life, and to provide them with solid proof of the product advantages.

“Having a second child will undoubtedly influence mums’ brand selection as finances could become stretched with two babies, driving mums to seek out more cost effective products. We find that economic conditions and level of education can also affect mums’ brand preference when it comes to buying products for their children. Brands would do well to give more details about milk sourcing to better engage with mums looking for better-for-baby options. Adapting to evolving distribution channels will be one of the key drivers of business growth in this market.

“The rise of breastfeeding will have a direct impact on the sales of infant milk products. However, some brands are already recognising the issue, and are expanding product portfolios to gain a competitive edge by offering milk formula products for pregnant and lactating women, as well as by offering advice on pregnant/lactating women’s diet, recipe, and exercise among others.”