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CCM: Stricter regulation for China’s infant formula business

The China Food and Drug Administration (CFDA) has revealed stricter regulations for base powder and misleading marketing strategies for China’s dairy enterprises in December. According to CCM, the effects are likely to wipe out a decent amount of small and middle-size companies in the very competitive market. 

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After some scandals regarding to Chinese infant product manufacturers, like the big melamine scandal in 2008, the Chinese government is tightening the supervision of the domestic enterprises in their Implementation of the Regulations on the Administration of Formula Registration for Infant Formula. The regulations, revealed in early December, 2016, are dealing with stricter rules for base powder usage and misleading marketing tactics. The new regulations are very likely to restructure the fierce market competition and lead to stricter controls.

Chinese companies can use domestic produced base powder as well as overseas produced one. But, whether the production is taking place in a plant, that is related to the dairy enterprise or a completely independent external producer, the purchasing company has to check and ensure the quality and safety of the base powder before using it in the production, according to CCM. Furthermore, the local food and drug administrations have to do controls in the producing plants, whenever they apply for a new product license or a license renewal. It is not decided yet, if the check of Chinese producers also is required for plants in oversea.

The other regulation regards to misleading marketing activities. It contains especially targeting the labelling of infant products and the claims that are involved with the labels. Both, Manufacturers or rather retailers as well as the local administrations are ordered to check any products and make sure, that the labelling is whether false nor infringing.

The regulations for labelling are supposed to make sure, that product name, declaration of ingredients, and the function description are true and not exaggerated or misleading.

According to CCM, the growing pressure on manufacturers regarding label management will lead customers to preferring big and established companies with a trustful brand and service. Small and middle-sized enterprises are likely not to stand their ground and be wiped out from the market.

What’s more, the new regulations lead many dairy producers to look for new markets and products. Some products, that have seen increased production and focus recently are milk formulae for adults, liquid milk, and organic infant formulae. According to CCM, already several manufacturers have made efforts in this new markets and try to diversify their business, avoiding more competition in the stricter regulated infant formula business.

China’s infant formula market is in a high competition, since over 100 manufacturers with thousands of product lines have flooded the market in the last decades. As a result, the market share of the top manufacturers is much less compared to the market share concentration in other developed countries. Also, some scandals in recent years have shaken the trust of consumers to domestic infant formula producers, opening a good market share for overseas products and brands.

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.

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