Posted by Giulia InteresseWritten by Giulia Interesse
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The expansion of China's infant formula market can be attributed to the increasing middle-class population, declining breastfeeding rates, and recent policy changes. This growth has led to fierce competition between domestic and global infant formula brands, coupled with the implementation of updated regulatory standards. In this context, we explore strategies for foreign companies to effectively introduce their infant formula products to this dynamic market.
In recent years, the overall Chinese infant formula market has sustained growth, albeit at a more moderate pace. This expansion is predominantly fueled by the country's substantial population, the increasing size of expending middle class, a decline in breastfeeding rates, and the influence of China's "three-child policy."
The evolving market dynamics have triggered intense competition among both international and domestic Chinese infant formula brands. Consequently, new regulations governing infant formula product registration have been introduced in the current year. Foreign brands aspiring to establish a presence in this sector need to comprehend the implications of these updated compliance norms and diligently adhere to crucial reporting requirements.
Market Analysis
Available data indicates that the Chinese infant formula market was anticipated to reach a valuation of approximately RMB 172 billion (US$23.6 billion) in 2022.
In the baby stage breakdown, the first and second stages are nearly equal, accounting for 26.3 percent and 26.7 percent, respectively. The third stage constitutes 42.4 percent of the market. Although the third stage spans twice the duration of the first and second stages combined, its actual consumer market size is not twice as large. This is attributed to the fact that, after the second stage (12 months), some parents choose alternative foods to substitute or complement formula feeding. Moreover, as children reach 36 months, many parents discontinue the use of formula entirely.
Key Distribution Channels
Analysing the distribution channels for maternal and infant formula consumption in China over recent years reveals a consistent dominance of specialized stores catering to mothers and babies. These stores have consistently held the majority share, fluctuating between 65 percent and 73 percent over a four-year period. In contrast, traditional offline supermarkets have experienced a noticeable decline, steadily decreasing from 11 percent to 7 percent.
Online e-commerce platforms maintained a stable 24 percent share in both 2019 and 2020, experiencing a slight dip to 20 percent in 2021. However, they rebounded to 22 percent in 2022, driven by the rapid expansion of short videos, livestream shopping, and the emergence of content-driven e-commerce.
Market Share
In the past, international brands commanded nearly 60 percent of China's infant formula market share.
Over time, China's regulatory landscape has become more stringent, coinciding with improvements in the quality of domestically produced baby formula. Consequently, the popularity of domestic brands has surged, with three Chinese firms among the top five infant formula brands in China as of 2022.
Regarding the origin of infant formula products, the majority of Chinese consumers (72.5 percent) still favor those from New Zealand. Following closely are China and Australia, with preference rates of 47.8 percent and 47.5 percent, respectively. The Netherlands and Ireland subsequently follow, with preference rates of 40.3 percent and 38.3 percent, respectively.
Strategic insights from Chinese brands
Cultural and nutritional preferences
Tailoring infant formula products to local preferences and nutritional needs is a hallmark of Chinese brands. Thorough research on Chinese breast milk and the specific nutritional requirements of infants informs the formulation of these products. Foreign brands face the challenge of aligning their offerings with these preferences and effectively conveying the suitability and benefits to the Chinese consumer base.
Market penetration strategies
Chinese domestic brands have demonstrated success in expanding their market share through the Mother-and-Baby Store (MBS) channel, particularly in lower-tier cities. This distribution strategy is deeply rooted in local consumer behavior and preferences. Foreign brands must carefully strategies to penetrate this channel effectively or identify alternative distribution channels that resonate with the Chinese audience. Failing to do so may impede their access to a significant portion of the market.
Branding and marketing
The Chinese infant formula market is fiercely competitive in terms of branding and marketing. Domestic brands have invested significantly in marketing activities, including product placement and celebrity endorsements, leveraging the familiarity and relatability of local personalities to build trust among consumers.
For foreign brands, the imperative is to develop culturally sensitive and impactful marketing campaigns that not only resonate with Chinese consumers but also differentiate themselves from local competitors.
Market access
Entering the infant formula market in China has been accompanied by challenges. A significant and memorable incident unfolded in 2008, marked by a severe scandal related to tainted formula milk that profoundly impacted consumer trust. This event revolved around the intentional contamination of infant formula with a harmful chemical known as melamine, commonly utilised in plastics and fertilizers. The repercussions of this incident shook the foundations of trust within the market.
The occurrence highlighted significant shortcomings in China's food safety regulations of that period, triggering a crisis of confidence among its citizens regarding domestically manufactured baby milk products. Responding promptly, the Chinese government took decisive action by implementing rigorous measures and safety standards for formula milk producers, leading to a comprehensive overhaul of the regulatory framework.
Subsequently, China has consistently raised the bar for safety requirements in its infant formula market.
For a comprehensive guide on exporting food products to China, click here.
Competent authorities and responsibilities
Regulatory oversight in China's infant formula market involves several key authorities, each with specific roles and responsibilities:
> State Administration for Market Regulation (SAMR): The SAMR, particularly its Special Food Safety Supervision and Management Department, plays a pivotal role in market supervision. It oversees special food categories, including infant formula, and is responsible for recipe registration.
> National Health Commission (NHC): The NHC is tasked with formulating national standards, registering new food ingredients, and contributing to the broader landscape of food safety.
> General Administration of Customs of China (GACC): The GACC is responsible for managing customs inspection, quarantine procedures, and declaration processes for imported infant formula products. They ensure strict adherence to safety requirements and oversee the registration of overseas food manufacturers.
Key steps to export infant formula to China
The following chart outlines the essential steps for exporting infant formula to China. It's crucial to recognize that these procedures pertain to the export of infant formula through general trade. In cases where infant formula is sold to China via authorizes cross-border e-commerce channels, certain requirements may be exempted.
Required Steps to Export Infant Formula to China |
| Import permit at state level | Infant formula products can only be exported to China from countries that have passed the national assessment. This assessment determines the countries/regions permitted to trade with China. The full Catalogue can be accessed on the GACC website. |
| Overseas manufacturers registration | As per the Regulations of the People’s Republic of China on the Registration and Administration of Overseas Manufacturers of Imported Food (hereinafter, ‘Decree 248’), all imported food products, including infant formula, require overseas manufacturers to be registered. This step involves recommendations from competent authorities in exporting countries. |
| Inspection and quarantine | Imported infant formula undergoes thorough food sanitation inspection, irrespective of its form. GACC has notified specific inspection and quarantine requirements under Decree 248 and 249 released in 2021 and 2022, respectively. These clarify the new conditions for the quarantine and inspection of dairy products. |
| Exporter and importer filing | Overseas exporters and importers in China must register with GACC, fostering transparency and accountability in the import process. |
Recipe registration of infant formula products
Since January 1, 2018, all infant formula products, whether domestically manufactured or imported into China, must undergo a registration process administered by the competent department under the State Administration for Market Regulation (SAMR). The assigned registration number must be prominently displayed on both the product label and accompanying instruction booklet.
To register, the below materials are required to be submitted:
> Formula registration application for infant formula milk powder products;
> Proof of the applicant’s qualifications;
> Quality and safety standards for raw materials;
> Product formula;
> Research and development justification report for the product formula;
> Production process description;
> Product inspection report;
> Documentation demonstrating research and development capabilities, production
capabilities, and testing capabilities;
> Draft labels and instructions along with their claimed explanations and supporting
materials.
Typically, each company is restricted to seeking approval for a maximum of nine formula products, organised into three distinct series. These series cover infant formula (Stage 1, designed for 0-6 months), older infant formula (Stage 2, tailored for 6-12 months), and young children formula (Stage 3, intended for 12-36 months).
Foreign applicants are required to designate a Chinese Responsibility Agent (CRA) to supervise the registration process. The CRA can be either the Chinese branch of the foreign applicant or an external third-party consulting company. The recipe registration certificate holds a validity period of five years. The renewal process for the registration should be initiated six months before the expiration of the certificate
The revised Measures for the Administration of Recipe Registration of Infant Formula Products
In February 2023, the SAMR introduced the amended Measures for the Administration of Recipe Registration of Infant Formula Products (hereinafter, ‘new infant formula recipe registration regulations’). Compared to previous regulations, the new infant formula recipe registration regulations introduced the following changes:
Strict formula registration and detailed inspection requirements: It emphasises the importance of conducting on-site inspections and outlines the specific situations where these inspections are necessary. Additionally, it highlights that during these on-site inspections, samples from the actual production process must be taken for dynamic testing. It also explicitly prohibits any attempts to circumvent the registration process, such as through disguised packaging.
Enhanced labeling standards and consumer protection: The new regulations stress the importance of clear and accurate product labeling to safeguard consumer rights. Specifically, the document mentions that if a product’s name includes any reference to animal-derived ingredients, all milk proteins, including fresh milk, milk powder, and whey protein, must exclusively come from the species indicated in the product name.
Promoting research and development innovation and improving the business environment: This indicates a broader strategy aimed at enhancing product quality and diversity. By fostering innovation, it aims to create an environment where businesses are motivated to develop new and improved products.
Labeling requirements of the infant formula
Apart from the labeling specifications outlined in the updated infant formula recipe registration regulations, infant formula products must comply with national standards. These include GB 13432-2013 for specialized dietary foods labeling, GB 7718-2011 for prepackaged food labeling, and GB 28050-2011 for nutrition labeling on prepackaged foods. Furthermore, regulations like Decree 248 mandate the inclusion of the registration number of overseas manufacturers on the packaging of imported infant formula products.
A summary of these requirements is presented in the table below.
New Labeling Requirements for Each Stage |
| Stage | Labeling requirements |
| Stage 1 (infants 0-6 months) | The label must indicate the product’s category, properties (such as whether it’s milk-based or soy-based), and its intended age range. The infant formula label must include the statement: ‘Breast milk is the best source of nourishment for infants aged 0-6 months. This product can be used to meet the needs of infants when breast milk is insufficient or unavailable.‘ The use of images featuring infants and women is prohibited on labels. Terms like ‘humanized milk‘ or ‘maternized milk’ should not be utilized. Instructions for usage should be provided on the label following the guidelines outlined in GB 10765-2021. |
| Stage 2 (infants 6-12 months) | The product’s classification, characteristics (such as product form), and appropriate age groups must be clearly indicated on the label. Instructions for usage must align with the guidelines set forth in GB 10767-2021. |
| Stage 3 (toddlers 12-36 months) | Overseas exporters and importers in China must register with GACC, fostering transparency and accountability in the import process. |
| Linoleic Acid (LA) | The labels must clearly display the categories of infant formula intended for special medical use, such as lactose-free formulas, along with the specific medical conditions they are applicable to. For infant formula designed for premature or low birth weight babies, the label should also provide information about the formula’s osmotic pressure. For products intended for infants older than 6 months, the label should indicate that if used for special medical conditions in babies older than 6 months, supplementary food must be added. The label should include the phrase ‘Under the guidance of a doctor or clinical nutritionist‘ for such specialized formulas. Labels must not feature images of babies or women, and terms like ‘humanized‘ or ‘maternized‘ or similar expressions should be avoided. Usage instructions must adhere to the specifications outlined in GB 25596-2010. |
| Source: Chemlinked | |
Notably, other unclear messaging must also be avoided.
Nutrient requirements for infant formula
China’s National Food Safety Standards for Infant Formula Food (GB 10765-2021), National Food Safety Standards for Larger Infant Formula Food (GB 10766-2021), and National Food Safety Standards for Toddler Formula Food (GB 10767-2021) (hereinafter referred to as the “new national standards”) feature revised ranges for essential nutrients, both minimum and maximum values.
Certainly, the fundamental objective of these regulations is to ensure a standardized nutritional composition for these products, ensuring that infants receive the necessary nutrients in a safe and effective manner. The modifications in nutrient values aim to improve the overall health and well-being of infants who consume these formulas, as illustrated in the table below.
2023 Nutrient Requirements for Infant Formula |
| Nutrient | Minimum value | Maximum value |
| Protein | 1.8 grams per serving | 4.5 grams per serving |
| Fat | 0.3 grams per serving | 6.0 grams per serving |
| Linoleic Acid (LA) | N/A | 1400mg LA/100 kcal |
Choline, Selenium, and Manganese
Under the new national standards, Choline, Selenium, and Manganese are now required to be included in Stage 1 and Stage 2 formulas, as they are regarded as substantially contributing to the overall well-being of infants.
Sugar and fructose
The addition of sugar/fructose is permitted in Stage 1 and Stage 2 formulas is no longer permitted. This limitation aims at alleviating concerns about dental problems during the critical growth phase and mitigates the risk of fostering a dependency on formulas with added sugars.
Lactose content
The new national standards in China also bring about a significant alteration pertaining to lactose levels. Lactose, a natural sugar present in milk, plays a crucial role in nourishing and aiding digestion in infants. The revised standards now mandate that all infant formula products adhere to specified lactose content criteria.
This modification is intended to guarantee that infants obtain adequate quantities of this vital nutrient, contributing energy and fostering their overall growth and development.
Seizing opportunities in China’s infant formula market
Meeting the rising demand for premium products
With Chinese parents becoming more conscious about the nutritional content of infant formula, brands can stand out by offering products with organic and high-quality ingredients. Indeed, premium, and organic product segments, are still largely dominated by foreign brands.
A notable example comes from Feihe International, a major player in the market, that has emphasized the use of organic ingredients in their formula products. They have witnessed increased consumer trust due to this commitment to quality sourcing.
E-commerce and digital marketing strategies
E-commerce is a vital channel in China. Foreign brands like Aptamil have succeeded by partnering with platforms like JD.com and Tmall. By offering convenient online purchasing and engaging promotions, they’ve effectively reached consumers even in lower-tier cities.
At the same time, foreign brands can learn from domestic competitors in leveraging local influencers who play a crucial role in dictating Chinese consumer behavior, especially through their online presence on social media platforms like WeChat and Xiaohongshu.
Collaborations and partnerships
Joint ventures provide access to local expertise and distribution networks. For instance, Reckitt Benckiser partnered with a Chinese dairy company, merging their infant nutrition business. This allowed them to combine global knowledge with local insights, enhancing their market position.
In addition, distributors play a pivotal role in reaching consumers. Being strategic in distributor selection is crucial. Mead Johnson Nutrition established a strong partnership with Beingmate, a Chinese infant food company, forging a collaboration that facilitated market entry and offered mutual benefits in terms of distribution reach.
These strategies can empower foreign brands to navigate the complexities of the Chinese infant formula market, capturing the attention and trust of Chinese parents while addressing their evolving preferences and needs.