The market size of infant formula in China is growing
In 2013 China is the global leading country with $12.93 million and still has enormous market growth. Indeed, the market of infant formula in China is supposed to gain up to $20.72 million in 2016.
Still the infant formula market has to struggle with many challenges a triggered by a series of food safety scandals. Firstly, in 2014, fake milk powder was discovered on the market. 13 cases of death babies in the province of Anhui were registered. In Sept 2008 the biggest food safety scandal for many years shook the world. Chinese brand Sanlu, and several more mostly domestic IF suppliers had produced milk powder where large quantities of melamine were added to give it the appearance of having adequate protein levels. In total 300,000 babies were infected, and 6 cases of death were registered. This food safety scandal caused significant changes in the Chinese as well as in the global IF market.
Due to the several food scandals, Chinese consumers lost their confidence to domestic products, which lead to a relocation of their demands to the global market. Moreover, the demand on the markets increases rapidly. This in turn has lead foreign suppliers to a critical situation for the production. They were unable to overcome the increased demand to deliver all supermarkets. As this market became too complex. Some foreign suppliers as Milupa stopped exporting their products to China.
The consequences are twofold. the supply cannot meet the demand, hence prices of foreign IF increase, and an independent third party market has started. Relatives and friends first started bringing IF as a souvenir to their families in China. Quickly entrepreneurs and students abroad discovered this market potential and conducts IF business via the Internet. They would provide foreign IF for a lower price than the legitimate channels in China, since the average prices in the market out of China are much lower. Of course this kind of business are fully illegitimate.
Rebuilding confidence of Infant formula buyers
On the long run these third party businesses should disappear from the market. Therefore the Chinese government orders new requirements in different areas to restore consumers’ trust and rebuild the Chinese IF market with domestic suppliers. New investments, higher management and production requirements, stricter environmental settings were planned and implemented. As China’s dairy industry has already been rebuilt with cows living on efficient massive factory farms and eating better food. China makes nearly as much milk as the pre-scandal peak in 2007, with 350,000 fewer cows. In 2018, 80% of the IF products should be produced on the Chinese market again. Furthermore, new technologies to identify germs in the early stage could gain potential on the Chinese market.
For further outlook quality certification can be a helpful tool to regain trust of Chinese consumers. Introducing a certification system that allows the full tracking of the ingredients used, possibly verified by independent international agencies, would be an important step in rebuilding confidence and maintining Branding strategy.