What is the reasoning behind China’s decision to increase infant formula regulations?

Since the 2008 Sanlu scandal, where tainted infant formula was fed to children, the market has been dominated by international companies. Considering China is the largest infant formula market globally, this dominance has been far from desirable economically.

While initially the incrementally stringent regulations may appear concerned with food safety, in reality the major driving forces behind them are market protectionism and a desire to develop a competitive domestic dairy sector.

How large is the Chinese infant formula market?

Current estimates value the market at $20bn (800,000t). Between 2010 and 2015, it increased 14% in volume, and 19% in value. In 2015, the import volume increased 40% and there was a further 10% increase in 2016 to 604,200t.

How many infant formula brands does China have?

It is estimated that there are approximately 2,000 brands in China with many formulas being rebranded, re-priced and repackaged to cater for the different socioeconomic characteristics of Chinese consumers in first-, second-, third- and fourth-tier cities. The government wants to reduce this to around 400, according to experts.

Why do Chinese parents prefer imported formula?

In China, imported equals safe, and safety ranks as a top concern for mothers. Domestic brands are still battling a poor reputation in the eyes of Chinese consumers after a litany of food safety scandals over the last decade.

Is the lifting of the one-child policy increasing demand for infant formula?

Certainly. China is expecting two million extra births a years (currently 16m a year). Rates for breastfeeding one month post-partum are less than 15%.

Will the increased regulations create a black market?

Undoubtedly, this will still be a factor although in comparison to standard trade and crossborder ecommerce, it is likely to be insignificant.

Will the regulations get more stringent?

Some of the big picture policies expounded by regulatory authorities suggest that the authorities have even more in store for industry. I guess we will see traceability requirements, new infant formula product standards and changes in administrative requirements at a minimum.

Is Ireland well positioned to deal with the increased regulations?

Companies in Ireland are already well positioned to deal with these regulations. Ireland has four infant formula manufacturers approved for export to China. Ireland is now China’s second most important infant formula trade partner and Irish infant formula brands are widely recognized by Chinese consumers as premium products. Wyeth has already been given the green light and I’ve no doubt the rest will follow suit.

How best should Ireland tap into the Chinese market?

Ireland already has an excellent reputation in China so I think a focus on finished products, value-added dairy and nutritionals is certainly an area Ireland can improve on here in China.