【英文】巴克莱报告：中国婴儿配方奶粉报告（120页）

Three of the top five brands in Chinese IMF are local brands, with their cumulative share  doubling over five years. This illustrates the resurgence of Chinese formula manufacturers in  recent years, after significant share loss after the melamine toxic milk crisis in 2008. Most of the success of the local players has until now been focused on lower-tier cities and in  lower price points, but this is now beginning to change. Players like Feihe are operating more at the premium and super-premium price points and are now turning their attention to the larger coastal tier-1 and 2 cities. Other local players, such as Junlebao and Yili, are both doing well, but  for now continue to focus more on the mainstream segment and on tier 3-5 cities. Danone’s Aptamil and Nestlé’s Illuma are the other two brands in the top 5, with Aptamil  being the big outperformer i.e. share up four-fold since 2014. Nestlé turned its super premium  brand illuma into a ‘billionaire’ brand in 2019 from virtually nothing seven years ago. Globally, Reckitt’s Enfamil is the no.1 brand given its strong position in the US (35% share)  but it has been losing share in China. Abbott’s Similac is also in a similar position i.e. no.2 in  US IMF with a >30% share but much less strong in China. Both these brands have suffered  from a lack of exposure to the super-premium segment, in our view. The other notable brands  in the global top 10 are Friesland Campina’s Friso (5% share in China) and Nestlé’s Nan brand.

There are other structural headwinds to population growth in China. The number of women aged 25-35 (key child bearing  age) will decrease by c.40 million in the next 10 years and the implementation of the two-child policy has not had the desired  impact. In addition, the cost of raising a child is significantly higher in China – buying premium formula every month for a 2– 3-month-old baby can cost up to c.40% of monthly salary. If there is another down year in terms of births, which we think is  likely in 2020, we would not be surprised if the government takes action. Better maternity benefits would be an obvious area. New regulation introduced in 2018 to address food safety issues has consolidated the market and local manufacturers  seem to be gaining traction. The market share of the two biggest Chinese IMF companies, Feihe and Jun Le Bao, has doubled  in the last two years while that of Nestle, Danone, Reckitt and Abbott combined has flat-lined. In June’19, the government  announced a target to reach 60% self-sufficiency within three years i.e. 60% of total IMF consumption manufactured locally  by 2022. This comes at a time when lower-tier cities, where domestic companies have a strong position, are outperforming. Companies are now looking at growth opportunities in lower tier cities – Birth rates in tier 4 cities and below is almost twice  that of the rest of the country. While distribution is a key challenge for multinationals, the main question is if they have the  right portfolio and go-to market strategy to succeed in tier 3/4/5 cities. We think this will be an uphill battle and is likely to  take a year or two for multinationals to find the right product at the right price point to deliver on local consumer preferences. Lower-tier cities need a unique marketing model to drive awareness and penetration. As consumers in lower-tier cities are  less likely to fully comprehend the science behind IMF (infant milk formula) products, educating them and developing brand  awareness is crucial. For example, Feihe held more than 500,000 face-to-face seminars with Chinese mothers, educating  them about the advantages of its products. Interestingly, with increased trust in the category, safety has become less of a  concern and the focus is now back on product superiority and functional benefits, making innovation crucial.