The Impact for Aussie Dairy of Domestic Infant Formula Milk Powder Enhancement Action Plan in China

The Chinese National Development and Reform Commission, the Ministry of Industry and Information Technology and other seven ministries and commissions recently jointly issued the “Domestic Infant Formula Milk Powder Enhancement Action Plan”. The plan proposes to vigorously implement the “quality improvement, industrial upgrading, brand cultivation” action plan for domestic infant formula milk powder, and strive to stabilize the self-sufficiency level of infant formula milk powder by more than 60%. However, at present, the domestic market share of domestic milk powder is only about 40%, and 60% is imported milk powder.

At present, the price of domestically produced milk powder is generally high, and everyone is pushing high-end products to curb consumption growth. In comparison, imported milk powder prices are cheaper, especially for cross-border purchases of milk powder.

In addition to the price, consumer trust in domestic milk powder needs to be improved. Statistics show that imports and joint venture milk powder accounted for 80% of the first- and second-tier markets. Dairy experts believe that to improve the trust of domestic milk powder, it is necessary to increase transparency and allow consumers to access this information.

In this regard, it is also mentioned in the plan to further improve the food safety information disclosure system for the formulation of infant formula milk powder, sampling results, supervision and inspection.

In addition, the plan also mentioned the merger and reorganization of milk powder production enterprises, and clearly encouraged local governments to carry out mergers and acquisitions and eliminate backward production capacity through various methods such as mergers and acquisitions, agreement transfer, joint restructuring and shareholding.

From the perspective of the external environment, many experts believe that the decline in population growth in China is the biggest challenge facing the milk powder industry. If enterprises vigorously develop markets below the third-tier cities, this gap can be made up.

The plan also requires strengthening imported milk powder and cross-border e-commerce management to support domestic milk powder and standardize and promote industry development.


CMA 2019 China New Export Delegation

Foreign brands enter the Chinese physical store channels under new “filing system”

With the rollout of the registration system and the filing system, foreign capital is accelerating its layout in the Chinese market.

Under the dual-track system, foreign capital has accelerated its distribution in the health care products market in China.

On May 14th, at the 2019 International Health and Nutrition (Spring) Expo, the Canadian dietary supplement brand Jamieson announced that the company will further explore the Chinese market in the form of general trade, to pharmacies, shopping malls, high-end supermarkets and expansion of physical store channels such as maternal and children stores. International giant health products companies accelerated gold digging in the Chinese market after China’s implementation of the new “reporting system” for the health care products industry.

According to Euromonitor data, the market size of China’s health care products industry reached 162.7 billion RMB in 2018, a year-on-year increase of 9.8%. The compound annual growth rate (CAGR) of 2018-2023 years is expected to be 9.10%. The huge market size and the introduction of a series of favorable policies to encourage imports have attracted international brands to come to China.

As the first international brand to enter China, from 2015 to 2018, the Jamieson and the Tmall International, JD International, Vip International, and NetEase Koala and other e-commerce platforms formed strategic cooperation, the proportion of sales in cross-border e-commerce channels increased from 0 to 90%, the CAGR boomed 136%, and the product repurchase rate reached 30%.

Although the cross-border e-commerce has opened channel resources for imported health products, however, with the gradual disappearance of online bonus and the escalation of consumption, it is difficult to continue to rely solely on online sales. The offline market has become one of the strength tests of whether overseas brands can take root in China. Since July 1, 2016, the “Regulations on the Registration and Recording of Health Foods” has been implemented, and the health food industry has officially entered the era of “registration system” and “filing system”.

According to the regulations, overseas manufacturers of health foods can be filers for the first time. Health foods supplemented with vitamins, minerals, and other nutrients, and nutrients have been included in the list of health food raw materials can be submitted a health food filing application to the State Food and Drug Administration. The implementation of the new policy has greatly shortened the time for approval of health products. Enterprises can enter the offline channel after filing, which will greatly improve the pace of health food entry into the market, especially imported health food.
The introduction of imported health care products in the retail channel can enhance consumers’ intuitive perception of the brand and stimulate consumption; on the other hand, it can also avoid the impact of cross-border e-commerce policy changes on the brand. However, if you want to ‘the land’, for overseas brands, the company must first face the increasingly strengthened supervision of the Chinese health care products market. How to quickly review the “blue hat” is the first problem to be faced in the offline layout.

According to the person in charge of Jamieson China, vitamins and minerals are the advantage products of Jamieson. Canada has a very strict health food supervision system, and Jamieson has created a “360-degree ultra-purity quality control system” to ensure that all production is beyond the pharmaceutical standards. Now, the company is following the registration and filing procedure of vitamin and mineral products in accordance with relevant regulations. A number of record products including vitamin C, vitamin C+D and vitamin E have been successfully approved, and more than 20 registered products have been obtained during the year.

Although the policy is favorable, the domestic consumption structure in China is upgraded, and the industry normative adjustment has given birth to new opportunities, for overseas brands, as the health foods listed through the filing are gradually increasing, the product differentiation is small and the competition will be more intense. Companies must rely on their brands, channels and terminal services to gain consumer recognition. “On one hand, we have accelerated the filing and registration process of health foods; on the other hand, in addition to healthy foods, we have developed and introduced regular foods that do not require registration.” The above-mentioned person in charge of Jamieson mentioned that the number of online players is increasing and the market is getting saturated, Jamieson made a bold attempt on new retail projects, such as the establishment of offline channels, integration of resources, and keeping up with the trend of online and offline integration.

CATIC this year is teaming up with Complementary Medicine Australia hosting the “CMA 2019 China New Export Delegation” for companies who are in the health products industry and willing to explore or obtain the latest industry updates of the Chinese market. To Join this delegation, please follow the link to register: