Overview:
China’s infant/young child’s formula milk powder market witnessed a fast growth from 2000-2008 thanks to various driving forces, and the market capacity rose from 106,000 tons in 2000 to 602,000 tons in 2008, an average annual growth as high as 25.18%.
The consumption level of infant/young child’s formula milk powder in China directly relates to the income of residents. Provincial capitals and coastal developed regions are the main consuming regions of top-end infant/young child’s formula milk powder.
A survey on producers of infant/young child’s formula milk powder by the BOABC project team discovered the famous brands in China mostly adopt modern sales channels, supermarkets are the most common, followed by convenience stores. The share of international brands in medical institutional and internet channels is noticeably larger than that of domestic brands.
The average retail price of infant/young child’s milk powder of domestic famous brands was roughly 80-100 yuan/kg in 2008, whereas the retail price of international brands of infant/young child’s milk powder was higher than 200 yuan/kg. From the perspective of the composition of the factory price of milk powder, the production cost (variable cost, mainly including raw materials, energy, water and electricity) of domestic made milk powder is over 70%, whereas it is around 40% for international brands of milk powder.
The results of a survey on the retail market by AC Nielsen revealed that China’s infant/young child’s formula milk powder market saw huge share changes from January 2007 to December 2008. These changes were divided by the melamine incident which was exposed on September 11th, 2008. Brands, which were detected to contain melamine in their products, suffered from a remarkable decline of market share, whereas brands, which did not contain melamine, saw a significant growth of market share.
Three standards on infant/young child’s formula milk powder products are being amended, i.e., Infants Formulas, Follow-up formulas and Formulas for Special Medical Purposes Intended for Infants. These three standards have stipulations on various aspects of the quality and safety of infant/young child’s formula milk powder products, and provide scientific reference for heightening the accession threshold of the infant/young child’s formula milk powder industry, for regulating the market behavior of producers, for meeting the nutrition demand under normal circumstance and special demand under special medical circumstance of infants and young children so as to guarantee the health growth of children. These relevant standards are significantly positive for the market expansion of the application of D70 and D90 in infant/young child’s formula milk powder in China.
Currently, the profit margin of infant/young child’s formula milk powder is the largest among dairy products in China. Owing to the rigid market demand thanks to the single child policy, lots of famous international and domestic brands have been attracted to engage in the market competition. The disparity between domestic and international brands shrank before the melamine incident, but the incident resulted to again expansion of the disparity. As time goes by, the impact from the melamine incident on Chinese consumers is fading, some domestic famous brands such as Yili are seeing a rapid recovery of market share.
At present, D70 and D90 are imported from different sources including West Europe, North America, Oceania, Latin America and East Europe. Comparatively speaking, China imports D70 and D90 more from West Europe, especially France, followed by Finland, Ireland, the Netherlands and Germany.
The new national standard of infant/young child’s formula milk powder clearly stipulates that whey powder for formulas of products must be desalted whey powder, and there is a clear maximum limit on impurity and ash content. This is positive towards D70 and especially D90 which enjoy high product quality. On the other hand, although the mixture of whey protein concentrate and lactose may replace the nutrition value of D90 to a certain extent and can save partial cost, yet this composition cannot completely replace the nutrition effect of D90. The combination of whey protein concentrate and lactose is just a necessary condition of the nutrition effect of D90, but not the sufficient condition. Therefore, to be strict, this type of combination is not in line with the stipulations of the new standard.
Currently, the output of infant/young child’s milk powder is 600,000 tons in China, of which most are low/medium-grade products, especially the products for the rural and township market. These low-grade products use a large amount of low-quality D40 and D50, or even non desalted whey powder such as sweet whey powder of even lower cost. Although this is not in conformity with the stipulations of the new standard which is about to be enacted, yet it is common practice. After the melamine incident, the Chinese Government takes the quality and safety issue of infant/young child’s food including infant/young child’s formula milk powder to a strategic height, the new standard which is about to be enacted learnt from international standards, and the market supervision shall be further strengthened.
Based on BOABC tentative estimate, only 1/3 of the 600,000 tons of output of infant/young child’s milk powder is applied with D70 and D90. from the perspective of the future trend, the proportion of breast feeding may further decline due to the low-growth of population, whereas the market capacity of infant/young child’s milk powder shall further grow. The new standard of infant/young child’s formula milk powder provides an opportunity of the application of D70 and D90 in infant/young child’s formula milk powder. In addition, more and more processing companies shall apply D70 and especially D90 for improvement of added value of products. BOABC expects a double digit annual growth rate of D70 and D90 in China from 2009-2013.
2. Analysis of Main Market Players of Infant/young Child’s Formula Milk Powder in China
2.1 Yili
2.1.1 Company Profile
Yili Group is the national leading player of the dairy industry, and it has been No. 1 in core business revenue for four consecutive years, and it was the exclusive dairy company sponsor for Beijing 2008 Olympic Games and 2010 World Expo.
The “World Brand Laboratory” evaluation data in June 2009 indicates the brand value of Yili is 20.545 billion yuan, sustaining the top rank in the dairy industry of China. Yili enjoys an absolute advantage of the dairy industry in economic impact, technical impact, culture impact and social impact.
Yili Group has five departments, i.e., liquid milk, cold beverage, milk powder, yogurt and raw milk. It has more than 130 companies, and more than 1000 varieties of its products including “Yili” ice cream bars, ice cream, milk powder, milk tea powder, aseptic milk, yogurt and cheese have passed the green food certification of the National Green Food Development Centre. Its sales volume of ice cream bars and ice cream has been taking the first rank in the nation for 12 consecutive years, its sales volume of UHT milk has been taking the first rank in the nation for 9 consecutive years, and its sales volume of milk powder and milk tea powder has been taking the first rank since 2005.
Table 2. 1 Registration Reference on Yili Group
Yili Group is one of a few large-scale dairy company listed at A share that have no background of foreign investment. The largest shareholder of Yili Group is Huhehaote Investment Co., Ltd. of Huhehaote State-owned Assets Management Bureau. By the end of December 31st, 2008, Huhehaote Investment Co., Ltd. had been holding 10.499% of the circulation stock of Yili in A share. Other primary shareholders are the Agricultural Bank of China, Zhongrong International Trust Co., Ltd. CITIC Securities, Bank of China and Taikang Life (Table 2.1).
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Table Of Contents :
Main Conclusions 1
1. Overview of Infant/young Child’s Formula Milk Powder in China 5
1.1 Market Overview 5
1.2 Market Analysis of Formula Milk Powder of Different Grades 6
1.2.1 Low-end Market of Infant/young Child’s Milk Powder 7
1.2.2 Medium-grade Market of Infant/young Child’s Milk Powder 8
1.2.3 Top-end Market of Infant/young Child’s Milk Powder 8
1.3 Analysis of Marketing Channels 9
1.4 Analysis of Market Price 9
1.4.1 Overview of Market Price of Infant/young Child’s Milk Powder 9
1.4.2 Price Comparison of Domestic and International Brands of Infant/young Child’s Milk Powder 10
1.5 Analysis of Profit Generation Ability of Infant/young Child’s Formula Powder 11
1.6 Analysis of Growing Potential of Market Consumption Demand 11
1.6.1 Current Status of Consumption Demand for Infant/young Child’s Milk Powder 11
1.6.2 Potential of Consumption Demand for Infant/young Child’s Milk Powder 12
1.7 Analysis of Market Share of Domestic and Foreign Brands 13
1.8 Standard of Infant/young Child’s Formula Milk Powder 16
1.8.1 Evolution of Market Shares of International and Domestic Brands 16
1.8.2 Demand 16
1.8.3 Price 17
1.8.4 Sales Promotion 17
Column 1 Major Conclusions of the Evaluation Report on Consumption of Infant/young Child’s Food in Wenzhou City 18
1.9 Standard of Infant/young Child’s Formula Milk Powder 19
1.9.1 Overview of the Amendment of Standard of Infant/young Child’s Formula Milk Powder 19
Table 1.5 List of Dairy Quality and Safety Standards 21
1.9.2 Major Content of the New Infant/young Child’s Formula Milk Powder Standard 23
1.9.3 Impacts from the New Standard on Infant/young Child’s Formula Milk Powder 38
2. Analysis of Main Market Players of Infant/young Child’s Formula Milk Powder in China 40
2.1 Yili 40
2.1.1 Company Profile 40
2.1.2 Composition of Products 45
2.1.3 Source of Raw Milk 46
2.1.4 Market Changes after Melamine Incident 46
2.2 Synutra 47
2.2.1 Company Profile 47
2.2.2 Product Composition 49
2.2.3 Source of Raw Milk 50
2.2.4 Market Changes after the Melamine Incident 50
2.3 Wondersun 51
2.3.1 Company Profile 51
2.3.2 Product Composition 53
2.3.3 Source of Raw Milk 54
2.3.4 Market Changes after the Melamine Incident 55
2.4 Firmus 55
2.4.1 Company Profile 55
2.4.2 Product Composition 57
2.4.3 Source of Raw Milk 58
2.4.4 Market Changes after Melamine Incident 58
2.5 Yashili 59
2.5.1 Company Profile 59
2.5.2 Product Composition 61
2.5.3 Source of Raw Milk 62
2.5.4 Market Changes after Melamine Incident 62
2.6 Beingmate 62
2.6.1 Company Profile 62
2.6.2 Product Composition 64
2.6.3 Source of Raw Milk 64
2.6.4 Market Changes after the Melamine Incident 64
2.7 Dumex 65
2.7.1 Company Profile 65
2.7.2 Product Structure 67
2.7.3 Source of Raw Milk 67
2.7.4 Market Changes after the Melamine Incident 67
2.8 Nestle 68
2.8.1 Company Profile 68
2.8.2 Product Composition 70
2.8.3 Source of Raw Milk 70
2.8.4 Market Changes after the Melamine Incident 71
3. Analysis of D70 and D90 Application in Infant/young Child’s Formula Milk Powder in China 72
3.1 Combination of Lactose and Whey Protein Concentrate to Replace D70 and D90 72
3.2 Application Scale of D70 & D90 in Infant/young Child’s Formula Milk Powder in China 73
3.3 Main Customers and Demand for D70 and D90 74
3.3.1 Main Customers 74
3.3.2 Demand 74
3.4 Import Volume and Price of D70 and D90 from Different Countries in 2009 75
3.4.1 Main Origins of Import 75
3.4.2 Import Volume and Price 75
3.5 Import Volume, Price and Market Share of D70 and D90 by Major Importers in 2009 76
3.6 Proportion of D70 and D90 in Phrase I, II and III Formula Milk Powder 79
3.7 Forecast of Growing Potential of D70 and D90 Application in Infant/young Child’s Formula Milk Powder, 2009-2013 80
Appendixes 81
Appendix 1: Balance Sheet of Milk in China, 2007-2009 81
Appendix 2: Balance Sheet of Full-cream Milk Powder in China, 2007-2009 82
Annexes 82
Annex1：List of Main Importers of Skimmed Milk Powder, 2009 82
Annex2：List of Main Importers of Whole Milk Powder no sugar added, 2009 84
Annex3：List of Main Importers of Whole Milk Powder sugar added, 2009 85
Annex4：List of Main Importers of Whey Products, 2009 86
Annex5：List of Main Importers of Lactose, 2009 88
Annex6：List of Main Importers of Butter, 2009 89
Tables & Figures
Figure 1.1 Market Development Speed of Infant/young Child’s Formula Milk Powder in China, 2000-2009 6
Figure 1.2 Market Share of Famous Brands of Infant/young Child’s Formula Milk Powder, Jan. 2007 – Dec. 2008 14
Figure 1.3 Market Share of Famous Brands of Infant/young Child’s Formula Milk Powder, Jan. 2008 – Jan. 2009 14
Figure 6-1 Changes of Market Share of Foreign and Domestic Famous Brands, by Sales Amount, Sept., 2008 to Sept., 2009 15
Figure 6-2 Changes of Market Share of Foreign and Domestic Famous Brands, by Sales Revenue, Sept., 2008 to Sept., 2009 16
Figure 3.1 China Whey Products Importation Trend, By Month, 2006~2009 76
Table 1.1 Price Difference of Milk Powder Consumed by Urban Residents of Different Provinces, 2009 6
Table 1.2 Comparison of Composition of Marketing Channels of Famous Brands of Infant/young Child’s Formula Milk Powder, 2009 9
Table 1.3 Comparison of Factory and Retail Price of Some Famous Brands of Infant/young Child’s Formula Milk Powder, 2006-2009 11
Table 1.4 Urban and Rural Per Capita Consumption of Infant/young Child’s Formula Milk Powder, 2003-2009 12
Table 1.5 Changes of Sales of Infant/young Child’s Formula Powder of Different Brands in Wenzhou, Zhejiang from January to May, 2009 18
Table 1.6 List of Dairy Quality and Safety Standards 21
Table1.7 Protein, Fat and Carbohydrate Index 25
Table1.8 Vatamin Index 26
Table1.9 Mineral Index Iron, Zinc, Sodum, Potassium, Magnesium, Copper and Manganese 27
Table 1.10 Optional Factors Index 27
Table 1.11 Other Index 27
Table1.12 Contamination Index（Subject to Dry matter） 28
Table 1.13 Microbe Index 28
Table 1.14 Average Amino Acid Content in Breast Milk of Chinese People (mg) 28
Table 1.15 Protein and Fat Index 30
Table 1.16 Vitamin Index 30
Table 1.17 Minerial Index 31
Table 1.18 Other Elements That Can Be Chosen 32
Table 1.19 Other Index（Based on its dry matter） 32
Table 1.20 Indices of Pollutants (based on dry matter) 32
Table 1.21 Indices of Microorganisms 32
Table 1.22 Protein, Fat and Carbohydrate Index 35
Table 1.23 Vitamin Index 35
Table 1.24 Minerial Index 36
Table 1.25 Indices of Elements That Can be Chosen 36
Table 1.26 Other Index（Based on its dry matter） 37
Table 1.27 Indices of Pollutants (based on dry matter） 37
Table 1.28 Indices of Microorganisms 37
Table 2. 1 Registration Reference on Yili Group 41
Table 2.2 Top 10 Leading Shareholders & Stock Distribution of Yili Group 41
Table 2.3 Important Sub Companies both at Home and Abroad of Yili (till the end of June 2009) 42
Table 2.4 List of Main Products of Yili Group 45
Table2.5 Main Products Output of Yili Group, 2007-2009 45
Table 2.6 Raw Milk Procurement Scale and Prices of Yili Group, 2008-2009 46
Table 2.7 Registration Reference on Shengyuan Dairy 48
Table2.8 Stockholders & Share Distribution of Shengyuan Dairy 48
Table 2.9 List of Main Products of Synutra Dairy 49
Table 2.10 Main Products Output of Shengyuan Dairy, 2006-2009 50
Table 2.11, Raw Milk Procurement Scale and Prices of Shengyuan Dairy, 2007-2009 50
Table 2.12 Registration Reference on Wondersun Dairy 52
Table 2.13 Shareholders and Stock Proportions of Wondersun Dairy 53
Table 2.14, Output of Main Products of Wandersun Dairy, 2006-2009 53
Table2.15 Raw Milk Procurement Scale and Prices of Wandersun Dairy, 2007-2008，2006-2009 54
Table2.16 Registration Reference on Feihe Dairy 56
Table 217 Shareholders and Proportion of Shares of Firmus Dairy 57
Table 2.18, Products of Firmus Dairy 57
Table 2.19 Output of Main Products of Firmus Dairy, 2007-2009 58
Table 2.20 Raw Milk Procurement Scale and Prices of Firmus Dairy，2006-2009 58
Table2.21 Registration Reference on Yashili 59
Table 2.22 Shareholders and Proportion of Shares of Yashili 60
Table 2.23 Main Products of Yashili 61
Table 2.24 Output of Main Products of Yashili, 2007-2009 61
Table 2.25 Registration Reference on Beingmate 63
Table 2.26 Shareholders and Proportion of Shares of Beingmate 63
Table 2.27 Registration Reference on Dumex Infants/Young Children Foods Co., LTD.. 65
Table 2.28 Shareholders and Proportion of Shares of Dumex 66
Table 2.29 Outputs of Products of Dumex, 2007-2009 67
Table 2.30 Output of Main Dairy Products of Nestle (China) Co., Ltd., 2007-2009 70
Table 3.1 Price of WPC80, Lactose and D90 made in America in Shanghai on September 16th 2009 72
Table3.2 Market Sizes of D70 & D90 in China, 2006-2009 74
Table 3.3 Leading Users and Their Demands of D70 and D90 in Chinese Market, 2009 75
Table 3.4 Imported quantity and price(CIF) of D70 & D90, By Country, 2009 76
Table 3.5 Import of Whey Product (HS04041000) by Processing Companies, 2009 77
Table 3.6 Import of Whey Product (HS04041000) by Trading Companies, 2009 78
Table 3.7 Import Volume, Price and Market Share of D70 and D90 by Main Importers, 2009 79
Table 3.8 Proportion of D70 in Phrase I, II and III Formula Milk Powder, 2006-2009 79
Table 3.9 Proportion of D90 in Phrase I, II and III Formula Milk Powder, 2006-2009 80
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