Dairy companies in China shift focus from infants to adults

CHINA – Dairy companies are recalibrating their strategies in China, moving away from targeting infants to focusing on the adult and ageing population.

This shift comes as China’s falling birth rate and intense market competition push dairy producers to seek new growth areas in one of the world’s largest milk markets.

Last month, The A2 Milk Company, based in New Zealand, announced the launch of new milk powder products designed for the “adult and ageing population” in China.

This move aligns with similar efforts by global giants like Danone, Abbott, Fonterra, and Nestlé, as well as major domestic players such as Yili and Feihe.

These companies are increasingly targeting senior nutrition, sports nutrition, and other health-related applications for dairy products.

Conor O’Sullivan, China manager for Bord Bia, Ireland’s food trade body, highlighted the growing interest in these new market segments.

“There’s a lot of attention now on senior nutrition, sports nutrition, and other applications for these [dairy] ingredients,” O’Sullivan noted.

He also pointed out that the Chinese food industry is experiencing oversupply and weak demand in many categories, driving the search for growth opportunities.

China’s birth rate hit a record low of 6.4 births per 1,000 people in 2023, according to official data. Meanwhile, the country’s population is rapidly ageing, a demographic shift expected to significantly impact the economy and reshape consumer markets.

As a result, Rabobank forecasts a 2.4% annual growth in dairy demand in China up to 2032. However, the infant formula market is projected to face “negative volume growth” in the coming years due to intense competition.

Michelle Huang, a Rabobank analyst, described the infant formula market as a “crowded space” with increasingly fierce competition. She suggested that companies diversify into sectors like “adult and medical nutrition” to sustain growth.

Foreign milk producers, who once dominated China’s dairy sector, are now contending with an increasingly saturated market as domestic producers ramp up output.

This shift echoes broader trends in other consumer markets, such as coffee and automobiles, driven by China’s push for higher self-sufficiency and tighter regulatory controls, particularly in the sensitive infant milk sector.

The competition is fierce, with brands ranging from basic to hyper-premium. Domestic milk supply is expanding rapidly, as noted by industry insiders.

Jason Yu, managing director at Kantar Worldpanel, observed that “almost every city has a local dairy company in China,” but also mentioned that government efforts to enhance safety have led to market consolidation.

In the past year, the top 10 brands in the infant formula market accounted for 80% of the market share, with half being Chinese.

The shift in focus is evident in the market moves of major companies. U.S.-based Abbott exited its infant formula business in China at the end of 2022 to concentrate more on adult products. Similarly, Nestlé closed a factory in Ireland last year, partly due to pressures in the Chinese market.

In Shanghai supermarkets, entire sections are now dedicated to adult milk products, emphasizing their protein and calcium content.

The A2 Milk Company’s new product for older consumers is designed to support immune system health as well as bone, joint, and muscle health. Feihe has also introduced a low-glycemic formula for the elderly, catering to the “different needs of middle-aged and elderly people.”

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