Euromonitor review, ‘Baby food in China’, said that China’s baby food market holds opportunities for manufacturers due to a strong economy and mounting middle-class that is driving growth.
But it found that the 2008 melamine milk contamination scandal that killed four children and hospitalised 54,000 has heavily shaped the market and continues to influence consumer trends.
It has led to a strengthening demand and trend towards premium purchases, which in turn has driven up market prices.
Euromonitor said: “After the melamine scandal, an increasing numbers of parents are willing to pay a premium for better quality products, and many of them perceive expensive international brands to be of better quality. This trend encourages top brands to increase their portfolios of premium brands.”
The rising cost of raw materials has also influenced the upward price trend, Euromonitor added.
Organic baby food is an emerging trend as well, due to consumers associating ‘organic’ with safety.
Euromonitor identified potential growth opportunity in organic baby food but pointed out that education would be needed to underpin success.
“Due to limitations in consumer understanding of the term ‘organic’, manufacturers hoping to introduce organic concepts will need to pay close attention to long-term consumer education,” it said.
Ausnutria Dairy (Hunan) Co Ltd. released an organic milk formula at the end of 2009 that Euromonitor identified as an innovative product development.
Euromonitor also noted that products were labelled with a strong focus on health-advantages and focus on fortification.
It said that this is a result of China’s strict marketing laws around baby food forbidding the advertisement of milk formula for new-born babies.
Manufacturers are also prohibited from marketing products as ‘close to breast milk’ as the government is focused on encouraging breast feeding.
Consumer lifestyle and education
Euromonitor found a trend towards prepared baby food, influenced by modern busy lifestyles.
While the prepared baby food accounted for just over 1% of total baby food sales in 2010, the small size combined with strong volume growth marked opportunity, the review said.
“With increasing numbers of young mothers entering the workforce, busier lifestyles will be the key drivers of growth in prepared baby food… the convenience aspect will help them to save time preparing nutritional food for babies at home,” Euromonitor said.
The review stated that throughout the country, sales of liquid milk formula remained low due to lack of consumer knowledge about the format.
“Consumers have become used to powder milk formula, thus leading manufacturers within milk formula lack any motivation to bring liquid milk formula products into mainland China,” it said.
Euromonitor predicted that milk formula is likely to account for the majority of baby food sales over the next decade.