China’s overcrowded infant formula market is projected to have lesser players as almost one-third of them fail to meet the new standards.
According to the latest report, some 112 brands of 31 milk powder manufacturers have been approved by the National Medical Products Administration as of 15 February 2023. They include industry leaders China Feihe, Inner Mongolia Yili Industrial Group, Junlebao Dairy Group, Mead Johnson, Wyeth, FrieslandCampina, and Danone.
The updated quality standards came into effect recently. It made a clear distinction between Step 2 (7-12 months) and Step 3 (13-36 months) infant formulas. Some of the major changes are lowering the upper limit of protein while requiring certain levels of selenium, manganese, and choline, and banning the sugars of sucrose and fructose. The revised standards also lower protein content by around 30% to prevent the risk of obesity.
These new requirements pose higher technological and R&D challenges which cannot be afforded by smaller players.
As a result, approximately one-third of baby formula brands will withdraw from the market because of the new standards, according to industry analysts. They accounted for almost 15% of the total market, equivalent to Rmb 24 billion (US$3.5 billion) in sales, according to a research report by Haitong International Securities Group.