Baby Formula Market in China

Baby formula is the most-demanded and regularly-bought baby product in China.

While Baby formula exhibits a clear dominance in the market, there is a growing preference for ultra-premium formula products.

Ultra-Premium Formulas are growing their market share.

In first- and second-tier cities, ultra-premium baby formula sales have outstripped cheaper options. Ultra-premium products account for more than half of the value sales.

Why Ultra-Premium Formula?

In China breastfeeding rates are at lowest.  More middle class mothers with disposable income choses baby formula over breastfeeding. They have increased awareness of the high nutrient contents. They follow the latest developments in the market. These educated mothers are ready to spend more on premium infant formula.

Opportunities for Brands

The demand to upgrade to premium infant formula has created opportunities. These opportunities are for products with value-added ingredients. More and more companies want to match the nutritional value of baby formula. Many of them are researching the ingredients of mother’s milk.

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China Baby Formula Market Still In It’s Infancy

Brands started to add the so-called ‘next-generation’ ingredients to their premium products.

The ingredients include:

• Omega-3 and omega-6 lipids,
• Oleic-palmitic-oleic (OPO), lactoferrin,
• Prebiotics,
• Human milk oligosaccharides.

These high-end components distinguish ultra-premium infant formula from the regular ones.  They also make them rather pricey.

The next-generation ingredients

DHA omega-3 and AA omega-6

DHA, or ‘good’ fat, is a major structural fat in the brain and retina of the eye. It is also a key component of the heart.

Studies have shown the importance of  DHA omega-3. It is significant for infant brain, eye, and nervous system development. It has been shown to support long-term heart health.

Recently, China has included DHA omega-3 and AA omega-6 in the necessary components category. Several research studies highlighted their role in infant development. DHA omega-3 and AA omega-6 have now been upgraded. They are included in the compulsory components category. That being said, all formulators are required to include DHA omega-3 and AA omega-6.

Probiotics

Probiotics are another new generation infant formula innovation. It promises to aid in the growth of beneficial microorganisms in the gut.

Bifidobacteria and Lactobacilli are the most frequent types of probiotics. These probiotics have been shown in studies to help prevent and treat infections. Such as infectious diarrhea and atopic dermatitis (eczema) in children.

There are thought to be other health advantages and they are being searched for. Such as:

• Decreased chance of food allergies and asthma
• Reduction of urinary tract infections
• Mitigation of infant colic symptoms

Foreign formula brands have established probiotic-based products in the China market. Though only a few Chinese companies have done so.

With the growing interest, more brands are expected to follow the trend.

Lactoferrin

Lactoferrin is a protein found in breast milk, along with the other three major proteins. It helps to protect babies from harmful bacteria by binding to the iron that the bacteria need to grow.

An infant’s immune system is functioning at full potential from the moment of birth. However they have not been exposed to any diseases or sicknesses. Their immunity doesn’t have a “memory” yet.

With the help of lactoferrin, the newborn’s immune system develops and activates natural defenses in the small intestine. It is an extremely fragile organ in the first months of a baby’s life.

Thus infants need lactoferrin as it stimulates the defense system to ‘train’ the newborn’s body to fight attacks.

This remarkable protein provides a high functional value to infant formulas

Prebiotics ( HMOs)

The most demanded component in the infant formula market in China is prebiotics; human milk oligosaccharides (HMOs).

Human milk oligosaccharides have only been discovered in breast milk up to now. However, thanks to scientific study, even moms who opt for baby formula can offer their children this incredible component.

HMOs are unique, non-digestible, complex carbohydrates. They have a prebiotic function. In other words, they nourish the good bacteria in our gut. HMOs don’t only support the gut; they help absorption into the bloodstream. So they contribute to a healthy immune system.

Out of the 200 HMOs found in human milk, only a few are developed commercially to be put into infant formula. Two notable and abundantly used HMOs in high-quality infant formulas are 2’-fucosyllactose (2’-FL) and 3-galactosyl lactose (3’GL).

Some of the world’s biggest companies have already started making products with HMOs.  Abbott, Nestlé, Mead Johnson, and Danone are among them.

It is obvious that HMO-based infant formula will account for the greatest number of new product introductions in the coming years.

HMO-based products are ultra-premium in the Baby formula market in China. Local dairy giants Feihe, Yili, H&H, and Yashili have been developing new brands. They are utilizing HMOs to catch up with the market trends

Oleic-Palmitic-Oleic (OPO)

Recent studies have proved using baby formula with high sn-2 palmitate improves fatty acid and calcium absorption. That is to say, it is beneficial for infant bone health, improved bone mineral content, and bone density.

The use of baby formula with high sn-2 palmitic acid has also been shown to decrease hard stools as a result; less crying time.

As Chinese parents become more aware of the benefits of OPO, the demand for this unique ingredient is growing rapidly. Almost 90% of the global demand for OPO comes from baby formula market in China

Consequently, OPO is one of the most common ingredients in premium and ultra-premium infant formula brands sold in the baby formula market in China.

World’s leading baby formula producers have created premium OPO brands. Exclusively for the Chinese formula market.

This includes Illuma-Nestlé, and Aptamil-Danone.

Local players have also launched specialized brands with OPO. Including Youhu-Feihe, Yili, Mengniu, Astrobaby, and Bright Dairy.

Goat Milk Formula

Popularity for goat milk-based formulas has grown over the years, with extensive use in Asia.

Parents prefer to use goat milk formula for their babies for various reasons, from personal preference to health concerns.

The smaller fat molecules in goat milk are similar to those found in breast milk, making them easy for a baby’s digestive system to break down. Therefore goat milk is said to be more easily digested by some parents, especially for fussy, gassy babies or infants who have reflux.

Baby formula market in China, due to its increasingly higher nutritional value, has become an alternative to cow milk formulas.

Several companies produce goat milk-based infant formulas. The three most prominent ones are Kabrita (Ausnutria), Yili Dairy, and Mengnui Dairy. Out of these, Kabrita holds almost 60% of the market share. They were one of the earliest to launch this product.

The future of infant formula in China

The Chinese infant formula market grows in value and parents are searching for the best products available on the market. The slowing growth rates of infant formula in China by volume, contrasted with the growing value increase. This will result in consolidation and a highly competitive market. 

More middle class parents are searching for premium and ultra premium baby formulas. They are looking for the next generation ingredients to give their babies the best possible start to life. They also want to know that these products provide nutrition free from heavy metals, pesticide residues and other chemicals and toxins. 

As a result, dairy firms are encouraging more research to develop new components. They want to bring infant formula closer to mother’s milk, the golden standard of the industry.

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