Navigating China’s Infant Formula Market Amid Declining Population and Strict Regulations in 2024

According to a Statista study, China holds a significant share of the global infant formula market, representing approximately 31%, valued at USD 16.85 billion in 2024. This substantial market share has been sustained over the past decade due to the high demand from China’s large population. However, the market now faces a challenging future due to demographic shifts, changing consumer preferences, regulatory adjustments, and evolving dynamics in international trade.

According to Worldometer, a real-time statistics platform that provides up-to-date information, China's population is estimated at 1.419 billion in 2024, reflecting a 0.23% year-on-year (YoY) decline. The population began declining in 2022, dropping by 0.09% YoY to 1.425 billion, marking the first decrease in six decades. This is the year when it was overtaken by India as the most populous country. This drop is largely attributed to China's one-child policy, which was in effect from 1980 to 2015. The downward trend is expected to continue, with projections indicating a population of 1.26 billion by 2050, driven by lower birth rates, an aging population, and economic pressures. This negative demographic outlook will likely impact the infant formula industry, as demand is expected to decrease in line with the declining number of children.

In addition to facing negative demographic trends, China is also experiencing a decline in its imports of infant formula products. According to International Trade Center (ITC) Trade Map data, China's imports under HS code 190110 (food preparations for infant use, including retail products made from flour, groats, meal, starch, or malt extract) totaled 237.91 thousand metric tons (mt) in 2023. This represents a 15.12% YoY drop and a significant 33.25% decline compared to the highest shipment in 2019. These 2023 shipments were sourced from the Netherlands (-20.11% YoY), New Zealand (+0.89% YoY), France (-18.35% YoY), Ireland (-13.53% YoY), and Germany (+67.84% YoY). The import decline is anticipated to persist in 2024, with China importing 97.25 thousand mt in the first half of the year, a 35% decrease compared to the same period in 2023.

Figure 1: China’s Infant Formula Product Imports from 2014 to 2024

The decline in China's infant formula product imports could be linked to a significant increase in domestic production, driven by a strategic goal to reduce dependence on foreign products and enhance food safety. This approach has spurred substantial investments in developing high-quality domestic infant formulas that resonate with Chinese consumers. Major Chinese dairy companies, such as Feihe and Yili, are expanding their production capacities and investing heavily in research and development to create infant formulas that closely mimic breast milk.

The new stringent regulations have significantly impacted China's infant formula market. Notably, China revised its Administrative Measures for infant formula, which were issued on July 10, 2023, and took effect on October 1, 2023. These regulations focus on enhancing the quality, safety, and traceability of infant formula products while also bolstering the domestic industry. One fundamental change is requiring all infant formula products to undergo a more rigorous registration process with the State Administration for Market Regulation (SAMR). This process includes a detailed review of each product's formulation to ensure it meets national nutritional and safety standards. Additionally, the regulations mandate clearer and more straightforward labeling for infant formula products, with strict guidelines on what can be included. To further improve consumer confidence and ensure product safety, the regulations also require full traceability throughout the supply chain.

The new regulations have already impacted the infant formula industry, leading to the closure of some small and medium-sized firms, while larger companies have expanded their market share. According to Kantar Worldpanel data, the a2 Milk Company saw a 1.5% increase in product sales during the first half of the 2023/24 fiscal year (FY). Similarly, Danone's Aptamil improved its market share, rising from 12.5% to 13% between FY22 and FY23. This growth among some companies can be attributed to the withdrawal of several smaller, less reputable brands that were unable to meet the stricter standards.

Opportunities and Market Outlook

Despite the evolving market landscape shaped by increasingly stringent regulations, China continues to offer significant opportunities for infant formula, particularly in the organic and premium segments. The Chinese market is shifting toward premiumization, with consumers showing a growing preference for higher-priced formulas that provide additional health benefits. This trend is primarily driven by rising health awareness among Chinese parents. Moreover, there is a noticeable increase in demand for organic and specialized infant formulas, such as hypoallergenic or lactose-free options. Additionally, specialized infant formulas, such as those designed for babies with cow milk protein allergy (CMPA), are also gaining popularity.

Some of China’s leading organic and premium products include Feihe’s Super-Premium Organic Zhenzhi, Abbott’s Similac 360 Total Care, and Danone’s Aptamil Profutura DuoAdvance. These products cater to the growing demand for high-quality, health-focused infant nutrition solutions in the Chinese market.

Figure 2: Danone’s Aptamil Profutura DuoAdvance

Looking ahead, China's infant formula market is expected to face challenges due to demographic shifts and the likely introduction of even stricter regulations, emphasizing food safety and quality control. Despite these pressures, demand for premium and organic products is projected to remain steady, with domestic brands continuing to gain market share. To stay competitive, manufacturers should prioritize innovation and introduce new products with added health benefits, such as formulas designed to address specific health concerns.