One-child policy shift to benefit China's infant formula industry

Publish time: 17th December, 2013      Source: CCM
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  China will loosen its one-child policy, allowing couples to have two children if just one of the parents is only child, according to a key decision approved at the Third Plenary Session of the 18th Communist Party of China Central Committee on 15 Nov. This policy shift is expected to lead to more newborns in the coming decades, and thus benefit the development of the domestic infant formula industry.


  The timetable for implementation of the policy has not been fixed, as the document just mentioned that the central government would gradually adjust and improve family planning policy to balance the population number in China.


  China’s family planning policy was first introduced in the late 1970s, aiming to control the surging population by limiting most urban couples to one child (some provinces allowed a second child if couples were both only children) and most rural couples to two children (if the first child was a girl).


  The changes in policy have aroused people’s attention. Many internet users welcomed the shift, though others said they would think twice about having a second child because of high living costs. Listed companies involved in mother and child supplies have seen a surge in their shares—Yili, Beingmate and Xinjiang Western Animal Husbandry Co., Ltd., (a recent entrant to the infant formula market) all saw their shares rise significantly on 18 Nov. but fall back on the next day.


  China saw 16.35 million births in 2012, and population experts estimate that the policy modification will add one to two million more to the annual total in the next two years. Various observers have suggested that the impact will be an additional RMB6 billion of sales every year from 2015 (sales of infant formula reached about RMB55 billion in 2012), or an increase in market size of 20-30%.


  The extra sales are expected to occur particularly for domestic brands of infant formula. The new policy will especially encourage more second children in 3rd and 4th tier cities, as in 1st and 2nd tier cities many couples are less willing to have a second child due to economic pressures and because the traditional perception of “more children is better” there has been more frequently impacted and weakened compared with elsewhere. It is evident that the multinational brands are typically much stronger in the latter cities (only 16% of their sales are obtained from 3rd/4th tier cities) whereas domestic brands hold higher shares in the 3rd and 4th tier cities (55% of their sales are contributed by 3rd and 4th tier cities).


  However, some industry experts take a conservative view of the new policy's impact, based principally on several areas of uncertainty. Firstly, no timetable for implementation of the new policy has been fixed. According to the National Health and Family Planning Commission (NHFPC), the central government will not set a confirmed timetable for the provinces but allow local governments to determine the timing according to what they judge to be practical locally. This means that it is possible in theory that only some provinces will fully implement this new policy in the future, with others holding back from doing so. Additionally, many couples seem to be concerned about the high cost of child-rearing: several surveys on this topic conducted by the NHFPC have suggested that 60% of the respondents on average are willing to have a second child if policy permits. As a result, the increased number of newborns is uncertain, so it is wise for the infant formula industry to take a conservative view of the prospects offered by this policy change.


  Table of Contents of Dairy Products China News1311:

  Cheese Market Growth

  Domestic Dairy Processors Raise Product Prices

  Revised Draft of Food Safety Law Announced

  One-Child Policy Shift to Benefit Infant Formula Industry

  YST Launches IPO

  Tingyi and Wakodo to Form JV

  Meiji Dairies Targets Fresh Milk and Yoghurt

  New Hope Dairy Re-enters Infant Formula Market

  Synutra to Acquire YouthbaseBeingmate Diversifies into Children’s Milk Market

  Beingmate Diversifies into Children’s Milk Market

  Guangda Group to Expand Milk Supply

  Vitasoy Launches Grain Milk


  Dairy Products China News, a monthly publication issued by CCM on 15th, offers you the latest information on new market dynamics, company development, new products, technology, packaging and raw material supply, etc. It also focuses on the government’s direction and polices, helping you get the whole picture of the industry.


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