Infant, toddler formula milk industry to be stregthened

Seven ministries, including the National Development and Reform Commission, China's top economic planner, jointly issued a notice of an action plan on Monday to strengthen the domestic infant and toddler formula milk industry, with goals to increase domestic supplies to more than 60 percent in the market.

The action plan is to further improve the quality, competence and reputation of domestic infant and toddler formula milk and strengthen domestic dairy enterprises, with the aim to steadily increase the production volumes of domestic infant and toddler formula milk.

The notice said the domestic supply is expected to increase to more than 60 percent of the industry in total.

According to global data analytics company Nielsen, domestic formula milk took up 43.7 percent of the market in 2018, enjoying a growth rate of 21.1 percent.

The notice also encourages companies to acquire and restructure the infant and toddler formula milk industries to eliminate outdated production capacities and further consolidate the industry.

It is expected to support eligible companies to issue shares and bonds to grow larger, and other taxation benefits will be offered to companies that establish dairy manufacturing facilities overseas.

The notice also urges enhancing the management of registrations from overseas infant and toddler formula milk producers and to strictly carry out the implementation of recording and registration of the sales system for imported dealers.

Re-packaging of imported large-packaged formula milk products is forbidden. Imported products that have not obtained formula registration in China are not allowed.

Cross-border retailers are responsible for the safety of the imported formula products and they should set up a safety and quality risk prevention system and tracking methods, the notice said.

An executive at Feihe International, the country's leading formula maker, said boosted by the government policy and action plans, domestic formula will be more efficient and more regulated.

The company has produced fresh dairy products and formula products locally at its own farms.

Song Liang, an independent dairy analyst, said that with the concentration of the domestic dairy brands and the shortened gap between domestic and international dairy players, the timing is right to issue the notice.

He said their research found that the domestic sales take up 35 percent of total sales in China and international brands have 65 percent.

"Confidence over domestic dairy brands among the public is recovering but still requires a solid foundation," Song said.

"It is vital for them to strengthen research and self-owned technology on formula to improve their product quality so as to compete better home and abroad," Song said.

He added that diversity also is critical for domestic brands to find a proper position in the market, given the fact some domestic brands are expensive and will cost them lower-tier markets.