The new infant formula milk powder registration rules, as“the strictest regulation on infant formula milk powder ever”, will come into force on 1 January, 2018. As stipulated in Administrative Measures on Product Formula Registration of Infant Formula Milk Powder released by China Food and Drug Administration (CFDA), the product formula of infant milk powder must be registered by CFDA agency before being sold in China’s market. The List of Cross-Border E-Commerce Retail Imports co-released by 11 PRC government departments, including Ministry of Finance, the Ministry of Commerce, also requires that from 1 January, 2018, all the infant formula milk powder products, including those imported through cross-border e-commerce from overseas retailers, have to be issued the certificate for product formula milk powder registration before being sold in China.
The implementation of this new policy is widely acclaimed that it will herald a new era of China’s infant formula milk powder market.
From the current reaction and public comments in China’s market, the new policy will provide good opportunities for Chinese milk powder manufacturers. Many Chinese consumers seem to show a pitiful lack of confidence in local milk powder brands, but label the foreign brands as “safe with high quality”. When exported to China, those overseas milk powder products’ prices will be doubled, e.g. a box of Aptamil milk powder sold in London is priced at ₤10.5-12.99 (￥92-114 RMB yuan), but when exported to China, its price is raised to ￥220-225 RMB yuan. In fact, after a series of baby milk powder“incidents”in China, the domestic milk powder manufacturers have improved their quality standards, which has reached or even surpassed the international standards. Consequently, the gap of the formula and source between local and overseas milk powder products has further narrowed down. And pastures in China are even more standardized and larger in scale compared to those oversea ones.
But there is still one concern for the Chinese consumers: their confidence in Chinese milk powder products recovers much more slowly than the improvement of the products’ quality and safety.
The implementation of “the strictest regulation on infant formula milk powder ever”will, at the level of national policy for the first time, clean up a huge number of milk powder brands and formula , including those so-called foreign products which are packaged in China and manufactured from factories without high standards. Those oversea brands with high price and low quality will be brought to light. Lv Chang, a renowned analyst in diary industry from Shenwan Hongyuan Securities, predicts that oversea milk powder brands will soon lose their dominance in the market and Chinese brands will embrace an overall re-invigoration. Also, most small and medium milk powder brands will be eliminated from the market by the new policy, making room for a market worth over 30 billion yuan.
Against the background of the new policy implementation, ECdataway conducts a research on the current situation of online milk powder market, with am aim to find out whether the e-commerce data can strengthen the above view about the industry and herald its future development.
It can be found out that the market is more centralized to the top brands. The market share of the Top 20 brands has grown from 86.5% in Q1 to 91.6% in Q4. As the No.1 brand, Aptamil’s market share has reached 16.1%, increasing 2.9% compared to Q1. And Beingmate, a local brand, has risen to the second place, with a market share of 12.4% in Q4, increasing 6.2% since Q1. The Top 3 brands all expand their market share. But there are still 11 brands have shrank in terms of market share. The whole market shows the trend that “the strong get stronger”.
The statistics show that the among the Top 20 brands, foreign brands occupies 65-67% market share while the local ones only 20-22% market share. During the June 18th online shopping carnival, foreign brands’ market share skyrocketed to 73.1%. While the local brands’ market share rose to 24.4% in November with the help of Double 11 shopping festival. But the situation is changing. The market share of foreign brands has been decreasing for 3 consecutive months since September, which in a sense testify the prediction upon the outlook of the local milk powder industry. Will the new policy maintain the status quo or intensify this trend in 2018? We still need to wait and see.