China Market: Milk Powder’s Market in China

China Market shares

• According to the CCTV News, the sales of foreign brand milk powder takes up 60% – 65% of total national sales in China. Even in the most of first and second tier cities, foreign brand milk powder has occupied most of the market. The total volume of importing milk powder has already reached 240,000 tons for the first quarter of 2013.
• In 2012, data from Nielsen illustrated that the total sales of infant milk powder in China last year was 38.5 billion RMB / 95 billion RMB (30% growth in 2012). “TOP 4 Foreign Brand Milk Powder Market Share”
  • Nestle + Weyth: 14.4% (Weyth: 10%, Nestle: 4.4%)
  • Mead Johnson: 12.3%
  • Dumex: 11.7%
  • Weyth: 11%
• The price of foreign brand milk powder is from 300 RMB to 500 RMB. Some insiders expressed that gross profit of foreign brand milk powder is 60% to 85%, and net margin is about 18% – 30%. However, Chinese brand’s gross profit is between 30% to 40%, net margin is less than 10%.

Much higher pricing in China

Take a 900g can packaging milk powder as an example,

• It is reported that the average price increase of foreign brand milk powder is over 60%.

Reasons for high prices in China

• The reasons why the price of foreign brand milk powder in China is much higher than other counties’ are large amount cost of various operating process and Chinese consumers’ preference and trust on foreign brands.
• Typically, Chinese consumers think the higher price the better quality. So, if there is few milk powder companies increase the price, Chinese consumers will take other brands which have not increased the price as cheap and of lower quality in terms of nutrition and other aspects. Therefore, milk powder companies always increase prices by exchanging a new packing or adjusting net content of milk powder.