China finally released the Regulations on the Administration of Formula Registration for Infant Formula, and it will be officially implemented from 1 October. CCM thinks that the new regulation will week out nearly 80% of infant formula brands in China and prompt the integration. Notably, it’s also a sign that China is stricter with the supervision of imported dairy products.
“Each enterprise, in principle, should have at most 3 ranges or brands and 9 formulations,” said the Article 9 in the regulation, “Each range/ brand comprises Stage 1 (0-6 months), Stage 2 (6-12 months) and Stage 3 (12-36 months).” What’s more, the regulation is applicable to both the domestic made and imported infant formulas, and is set strict requirements on the applicants' qualifications.
Sharp decreases in infant formula brands in China
At present, there exist a large number of infant formula producers and infant formulations. The new regulation is expected to push the integration of brands, thus eliminating many small- and mid-sized dairy companies.
In 2017, most of the infant formula production licences held by the 103 dairy companies will expire. The small- and mid-sized dairy companies that do not achieve M&A this year, will not be granted with licences, and will have to produce other dairy products. The number of brands will decrease from 2,000 to 522. In particular, the Chinese dairy companies will suffer the most. Many regional and small brands and brands specifically marketed on E-commerce platforms will be weeded out perpetually.
The domestic infant formula market, with strong demand, is developing fast, however for a short time. To date there are 103 infant formula producers in China, combined number of formulations up to 2,000 - specific producers even have 180+ formulations. Problems like excess formulations, irregular formulation making, and frequent formulation changes, are prominent, having certain quality and safety risks and making it hard for consumers to make choices.
After practicing the new policy, the number of infant formula brands in the market will be cut sharply. In total, there are 103 Chinese dairy companies licenced for producing infant formulas, and 71 foreign dairy companies (3 marked for “Suspension” now) certified by China’s Certification and Accreditation Administration. Even if they all apply for 3 ranges/ brands successfully, there will be only 522 brands - nearly 80% of brands will be knocked out.
Overseas infant formulas face difficulties entering China’s market
Not only China’s infant formula enterprises will be affected a lot by the new regulation, but the overseas producers. Many foreign small brands and OEM (original equipment manufacturer) companies are unable to get access to Chinese market, and Chinese government is stricter with the supervision of imported dairy products.
Article 2 emphasizes the applicable range, to all domestic made and imported
infant formulas. During the WTO’s discussion about the regulation, the EU was
the first to start revolt, claiming that China’s new registration policy would
be a severe drawback to the free trade spirit. Currently, OEM is a mainstream
during the dairy production. The restriction on formulations will pull down the
production, and then will make OEM dairy companies unable to produce infant
formulas for their cooperative enterprises. This, in particular, will greatly
impact the European dairy companies, as many of them have no independent
brands, and instead stand in the market by fully relying on OEM business.
Except New Zealand and Australia which have signed the free trade agreements with China, the Netherlands, Ireland, Japan and South Korea at that time were all doubted about the “3 ranges or brands and 9 formulations” regulation. They expected China to revise the items and relax the restrictions. However, China rejected straightforwardly, “The period that we solicited opinions from member countries and regions has closed.”
Recent measures taken by Chinese government indicates its stricter supervision on imported dairy products. On 16 May, Agrana, an Austrian infant formula manufacturer, was suspended from registration for sale in China by CNCA (Certification and Accreditation Administration). A few days later, the registrations of Germany Topfer and French Angi’s Land in China were also halted. Within two weeks, three big overseas infant formula brands were restricted in China.
“The combination of registration system, production certificate and overseas enterprise authentication of milk powder will speed up the elimination of Chinese and foreign laggard infant formula producers; what’s more, it can promote the integration of miscellaneous brands and strengthen the safety of dairy products in the market, which is conducive to resume consumers’ confidence”, stated by Song Liang, a dairy specialist.
- IFT (the Institute of Food Technologists )
The IFT16 will be held in Chicago on 16-19 July. This is where the latest global food trends are on display. You can discover the food industry’s largest and latest information. CCM will also attend the expo, and welcome to discuss with us about China’s food industry at Booth #4921.
If you are interested in more information about infant formula in China, or dairy, sweeteners, amino acids, corn, vitamin and other food industries, just come and discuss with us.
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