Chinese infant formula market is seeing increasing demand for high-end and ultra-premium products

Infant formulas, or infant formulas, are powdered / liquid foods used as a breastmilk substitute for babies aged 1 to 24 months. It is one of the fastest growing products in the baby food market segment. In 2020, the global infant formula market was valued at US $ 56 billion. The market is growing at an astounding rate, and one of the main reasons is a significant increase in demand for infant formula in China, which accounted for nearly 50% of the total market value (US $ 28 billion) in 2020. .

The continued demand for infant formula can be attributed to a growing middle class population, increasing female participation in the labor market, and growing awareness among Chinese parents of the nutritional value of infant formula.

In recent years, another important growth factor has emerged: the rise of premium and ultra-premium formulas on the Chinese market.

This trend is illustrated by the growth rates of the infant formula market in 2015-2018, during which the market saw only a 5.5% increase in infant formula sales in volume but increased by more than 9% in value during the same period.

Premiumisation of infant formulas

Companies conduct extensive research on the components of breast milk in order to match their nutritional value in infant formula. Some of the latest ingredient developments include OPO (oleic-palmitic-oleic), lactoferrin, prebiotics (HMO or breast milk oligosaccharides), and omega-3 and omega-6 lipids. Today, these are important ingredients that distinguish high-end and ultra-premium infant formula, which makes these products very expensive.

All major infant formula exporters and local companies in China have launched special infant formula brands to take advantage of the growing demand with the following ingredients:

Oleic-Palmitic-Oleic (OPO)

Oleic-palmitic-oleic (OPO) refers to a fatty structure in which palmitic acid is attached to the SN-2 position of the glycerol chain. It is a unique fatty structure found in large quantities in human breast milk. It is now proactively used in infant formulations due to its benefits such as easy digestion, colic relief, and better calcium absorption.

China is the largest OPO market, accounting for almost 90% of global demand. OPO is one of the most common ingredients in high-end and ultra-premium infant formula brands sold in China. Parents are also very aware of this ingredient, a major factor driving the sales of premium OPO infant formula in China.

Almost all of the global infant formula companies have launched premium OPO brands exclusively for the Chinese market, including Illuma (Nestle), Aptamil (Danone), Kabrita (Ausnutria) and Vana-Sana (FrieslandCampina), among others. Likewise, local players have launched specialty brands with OPO, including Astrobaby, Miao Shu Huan, Xingjie Youhu (Feihe), Yili, Mengniu and Bright Dairy to take advantage of the growing demand.

Prebiotics (mainly HMO)

Prebiotics, namely Breast milk oligosaccharides (HMO)), strengthen their presence in the infant formula market. HMOs are unique complex carbohydrates that help stimulate the growth of good bacteria in the gut. They are naturally present in breast milk, representing the third most important component after fats and proteins.

Currently, over 200 HMOs have been identified in breast milk, but only a few of them are being developed commercially for inclusion in infant formula. 2′-fucosyllactose (2′-FL) and 3-galactosyllactose (3′-GL) are two leading HMOs used extensively in premium and ultra-premium infant formulas.

Global companies such as Abbott, Nestle, Mead Johnson and Danone recently developed formulations with HMOs to capture market developments. HMO-based infant formula is expected to account for the highest number of new product launches over the next two years.

In China, HMO-based formulations are considered ultra-premium. Local giant dairy companies such as Feihe, Yili, H&H, and Yashili have made rapid strides in launching new brands with HMOs.

Lactoferrin

Lactoferrin, also known as lactotransferrin, is a multifunctional iron transport protein naturally present in human and cow’s milk. As an antimicrobial and antiviral agent, lactoferrin is vital for building the immune system of an infant. It also helps babies absorb iron in breast milk. Lactoferrin is widely incorporated in infant formulas to emulate lactoferrin found in breast milk. Commercially, lactoferrin is made by fermentation and skimming of bovine milk, which is rich in lactoferrin. Lactoferrin infant formulas are generally expensive and are classified as premium by most brands in China.

The main brands containing lactoferrin in their formulations are Enfamil Enspire (Mead Johnson), Premium Zhenai Beihu and Zhenai Feifan (Feihe).

Probiotics

Probiotics continue to be featured in infant formula to help promote good bacteria in the gut. Bifidobacterium lactis and Lactobacilli species are commonly found bacterial strains Im infants, helping to prevent disorders such as infectious diarrhea and atopic dermatitis.

Several international formula brands like Gerber have launched probiotic-based formulas in the Chinese market, like the Gerber brands Soft – B. lactis and Gerber Soothe – L. reuteri. So far, very few Chinese companies have launched probiotic-based formulations, but this is an area of ​​high interest.

Goat’s milk formula

The basic milk powder used to formulate infant formulas is traditionally skimmed from cow’s milk. However, increasing cases of cow’s milk allergy have made goat’s milk a preferable alternative. Several scientific studies also report easy digestion and absorption of infant formula made from goat’s milk by babies.

Over the years, preparations made from goat’s milk have become popular and have been widely used by people in Asia. Almost a fifth of the total canned infant food sold in South Korea are made from goat’s milk. In China, goat’s milk has gained in importance in recent years due to its increasingly high nutritional values. According to a report published by the Chinese Academy of Social Sciences, the market for infant formula made from goat’s milk nearly doubled, reaching US $ 1.4 billion in 2020 from US $ 0.7 billion in sales in 2015.

The main infant formula companies offering goat milk formulations are Kabrita (Ausnutria), Yili Dairy and Mengnui Dairy. Kabrita was one of the first brands to enter this space and therefore occupies a dominant position in the market, with a market share of almost 60%.

Omega-3, -6 oils

Long chain omega-3 fatty acid docosahexaenoic acid (DHA), and long chain omega-6 fatty acid arachidonic acid (ARA), are commonly found in breast milk. These essential polyunsaturated fatty acids have been shown to support the growth and development of the central nervous system in infants.

Although DHA is considered the epitome of growing babies, it was until recently included in the category of “optional ingredients” by the Chinese regulatory agency. DHA has now been upgraded to the “essential ingredient” category, which requires all formulators to include this ingredient as a mandatory requirement. (ARA is always categorized as “optional ingredients” and is therefore not mandatory in final products.)

A bright future for infant formula in China

Following the adoption of recent Chinese childbirth policies, birth rates in China are expected to rise or even remain constant. There has been a paradigm shift in the purchasing behavior of infant formula consumers, with parents showing a preference for high-end and ultra-premium infant formula over conventional infant formula. This trend is expected to continue. The declining growth rates of infant formula in China in volume, juxtaposed with increasing growth rates in value, will lead to consolidation and a highly competitive market. As a result, dairy companies are now endorsing aggressive research to develop new ingredients that can bring infant formula closer to breast milk, the industry’s “gold standard”.

Anil Pothamsetty ([email protected]) is a consultant, specialty chemicals, for ChemBizR. ChemBizR is a research and advisory business partner of chemical companies worldwide, involved in solving critical business challenges and companies’ strategic growth initiatives to help them transform their businesses for sustainable growth in a highly competitive environment. and rapidly evolving. For more information, send an email to [email protected]

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