China’s IMF Market After Registration: Risks Exist, Shifts Ahead

We see risks to the growth of China’s infant milk formula (IMF) market in the years to come. The odds for growth slowing further than anticipated are increasingly rising. One of the main concerns is that birth rates are likely to be disappointing. Even with a relaxed birth policy that allows Chinese families to have two children, it now seems more likely that the awaited boost to the birth rate will be lower than expected.

However, China’s per capita consumption of IMF products (by infants/toddlers of 0–36 months of age) is among the highest in the world, but there is plenty of room for trading up. Starting from 2018, China has officially entered a new era, requiring all IMF products sold in China to be registered. There is, however, a transitional grace period, bringing some uncertainty regarding market behaviour in the short term.

In the longer run, we expect consolidation, which will eliminate about 70% of the existing brands selling in the country. With this and the further market growth slowdown in mind, both onshore and offshore IMF players with exposure to China will need to be aware of strategic implications.