Across The Border | Regulation intensifies competition on China’s baby-milk powder market

China’s infant milk powder makers are facing white-hot competition because of tighter regulations, challenges from foreign brands and e-commerce channels.

“Domestic milk powder makers are under great de-stocking and price cut pressure,” Summer Wang, consumer sector analyst at BOCOM International said. “The primary reason is the coming registration-based system set by the government,”

The China Food and Drug Administration (CFDA) in September released a draft notice. It said it would allow each milk-powder manufacturer to produce five categories of infant formula. Each category consists of just three products, all of which must be registered.

A further notice from the CFDA decreased the quota to three catagories.

“Manufacturers with more than nine products have only 18 months to clear their inventories. That created industry wide de-stocking and downward price pressure. It created intense competition,” Wang said.

The rule takes effect on January 1, 2018, although details are to be confirmed.