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Baby Food - China - July 2013

“The lucrative opportunities within the baby formula segment are attracting the attention of both international brands and domestic companies. As the competition intensifies, manufacturers should look for opportunities to meet consumers’ potential future needs to give them an advantage over the competition.”

– Laurel Gu – Senior Research Analyst

In this report, we cover the following areas:

  • What is the current status and trends of the baby food market in China and what are drivers of and barriers to growth?
  • Who are the leading and upcoming companies in the market and what are their strengths and areas of opportunities?
  • What are Chinese mums’ usage behaviour and attitudes towards baby food?
  • What future opportunities does the potential rebound of the breastfeeding rate in China offer, and how should baby food manufacturers react to grab opportunities to drive growth?
  • Where are the key areas for business growth within the supplementary baby food segment in China and how can manufacturers capitalise on the opportunities for innovation?
  • What are the implications of the newly issued government regulation on baby formula and what opportunities does it bring to domestic baby food manufacturers, for them to be able to compete with the leading international companies?

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Table of contents

  1. Introduction

      • Definition
        • Report structure
          • Methodology
            • Abbreviations
            • Executive Summary

                • The market
                  • Figure 1: Total China retail sales of baby food and growth rate, by value and volume, 2008-13 (est)
                  • Figure 2: Total China retail volume sales of baby food, 2008-18 (000’s tonnes)
                  • Figure 3: Total China retail value sales of baby food, 2008-18
                  • Figure 4: Baby food value sales (RMB Bn) and share, by segment, 2012
                • Companies and brands
                  • Figure 5: Leading companies’ market shares in the China retail baby food market, by value, 2010-12
                • The consumer
                  • Baby food usage and consumption frequency
                    • Figure 6: Baby food usage and frequency, April 2013
                  • Brand penetration and loyalty
                    • Figure 7: Baby food brand penetration and loyalty, April 2013
                  • Popular features of baby food products
                    • Figure 8: Popular features of baby food products, April 2013
                  • Channels of purchasing baby food
                    • Figure 9: Channels of purchasing baby food, April 2013
                  • Attitudes towards baby food
                    • Figure 10: Attitudes towards baby food, April 2013
                  • Key trends
                    • The anticipated rising trend of breastfeeding in China brings both challenges and opportunities for baby food manufacturers
                      • Innovation can boost the supplementary baby food market
                        • Domestic baby formula companies are working hard to improve product quality and rebuild consumer trust
                          • What we think
                          • The Market

                            • Key points
                              • Market size and forecast
                                • China has become the world’s largest baby food market
                                  • Figure 11: Total China retail volume and value sales of baby food, 2008-13 (est)
                                  • Figure 12: Average annual baby food consumption, by volume, by country, Global, 2011
                                • Growth will continue but at a slower pace
                                  • Figure 13: Total China retail volume sales of baby food, 2008-18
                                  • Figure 14: Total China retail value sales of baby food, 2008-18
                                  • Figure 15: Total China retail volume sales of baby food, by segment 2008-18
                                  • Figure 16: Total China retail value sales of baby food, by segment, 2008-18
                                • Market drivers
                                  • Urbanisation, working mums, rising incomes and extended length of usage of baby food
                                    • Premiumisation on the back of food scare
                                      • Market barriers
                                        • The baby food category is overshadowed by the uncertainty surrounding the government policies towards breastfeeding and baby formula manufacturers
                                          • Market segmentation
                                            • By product types
                                              • Figure 17: Share of the baby food market by product segment, by value, by country, 2011
                                              • Figure 18: Value of the China retail baby food market, by segment, 2008-12
                                            • By price tiers
                                                • Figure 19: Representative brands in the China retail baby formula segment, by price tier, 2013
                                                • Figure 20: Representative brands in the China retail infant cereal segment, by price tier, 2013
                                            • Companies and Brands

                                              • Key points
                                                • Company share
                                                  • Figure 21: Leading companies’ market shares in the China retail baby food market, by value, 2010 -12
                                                • Company trends
                                                  • Women’s hospitals have become the most effective channels for new baby recruitment
                                                    • Domestic baby formula manufacturers are scrambling to secure high quality raw milk supply overseas
                                                      • The focus of product innovation has shifted onto supplementary baby food
                                                        • Figure 22: Share of new product launches within the China baby food market, by segment, 2009-13*
                                                      • Smaller baby food companies are leveraging the online distribution channels to drive growth
                                                        • Companies
                                                          • International companies
                                                            • Nestlé S.A.
                                                              • Mead Johnson
                                                                • Danone
                                                                  • Heinz
                                                                    • Domestic companies
                                                                      • Yili
                                                                        • Beingmate
                                                                          • Mengniu
                                                                            • Biostime
                                                                            • The Consumer – Usage of Baby Food

                                                                              • Key points
                                                                                • Chinese babies are fed a wide variety of foods
                                                                                  • Figure 23: Types of baby food used in the last 12 months, April 2013
                                                                                • Food safety is the main concern when deciding what to feed the babies
                                                                                    • Figure 24: Reasons for not using baby food/snacks/drinks or supplementary food in the last 12 months, April 2013
                                                                                  • Opportunities for driving consumption frequency of supplementary baby food
                                                                                      • Figure 25: Frequency of usage of baby food, by type, April 2013
                                                                                    • Target consumer analysis
                                                                                        • Figure 26: Types of baby food used, by household income and age of child, top 8 baby food segments, April 2013
                                                                                    • The Consumer – Brand Penetration and Loyalty

                                                                                      • Key points
                                                                                        • International brands are more popular among Chinese consumers
                                                                                          • Figure 27: Brands of baby foods purchased in the last 12 months, April 2013
                                                                                        • Target consumer analysis
                                                                                          • Figure 28: Brands of baby foods purchased in the last 12 months, by city, April 2013
                                                                                          • Figure 29: Brands of baby foods purchased in the last 12 months, by city, April 2013
                                                                                          • Figure 30: Brands of baby foods purchased/purchased most often in the last 12 months, April 2013
                                                                                          • Figure 31: Brands of baby foods purchased most often in the last 12 months, by household income and city, April 2013
                                                                                      • The Consumer – Popular Features of Baby Food Products

                                                                                        • Key points
                                                                                          • Boosting immunity, being nutritionally close to breast milk and having natural ingredients are top purchase drivers
                                                                                              • Figure 32: Factors considered important when buying baby food, April 2013
                                                                                            • Target consumer analysis
                                                                                                • Figure 33: Factors considered important when buying baby food (Rank 1), by household income, child age and city tier, April 2013
                                                                                            • The Consumer – Channels for Buying Baby Food Products

                                                                                              • Key points
                                                                                                • Traditional brick and mortar stores are still most popular
                                                                                                    • Figure 34: Venues of purchasing baby foods, April 2013
                                                                                                  • Target consumer analysis
                                                                                                    • Figure 35: Venues of purchasing baby foods, by age of mother and household income, April 2013
                                                                                                    • Figure 36: Venues of purchasing baby foods, by age of baby and city, April 2013
                                                                                                • The Consumer – Attitude Towards Baby Food

                                                                                                  • Key points
                                                                                                    • Healthiness is most important
                                                                                                      • Product reviews and recommendations guiding mothers’ purchasing decisions
                                                                                                        • Mothers prefer imported baby food mainly for safety and quality reasons
                                                                                                          • Figure 37: Attitudes towards baby foods, April 2013
                                                                                                        • Target consumer analysis
                                                                                                            • Figure 38: Healthiness and nutrition related attitudes towards baby foods, by household income, age of child and city tier, April 2013
                                                                                                            • Figure 39: Source of product information related attitudes to baby foods, by household income, age of child and city tier, April 2013
                                                                                                            • Figure 40: Product origin (imported vs local) related attitudes to baby foods, by household income and city tier, April 2013
                                                                                                        • Key Issue – Reacting to the Rising Rate of Breastfeeding in China

                                                                                                          • Key points
                                                                                                            • Infant stage (0-6 months) baby formula will give way to breastfeeding
                                                                                                              • Safety issues intensify Chinese mothers’ concerns over baby formula
                                                                                                                • The breastfeeding rate is low in China…
                                                                                                                  • …but health workers and the government are fighting back
                                                                                                                    • Food safety and the promotion of breastfeeding will hit the formula market
                                                                                                                      • Baby accessories manufacturers have helped make breastfeeding more convenient
                                                                                                                        • Figure 41: Philips electronic breast milk pump (left); Medela electronic breast milk pump (middle); Medela ice bag for preserving breast milk (right)
                                                                                                                      • Insufficient breast milk production also leads some to turn to formula
                                                                                                                        • Traditional Chinese Medicine is used to promote lactation
                                                                                                                          • Herbal tea could provide an affordable and convenient alternative
                                                                                                                            • Figure 42: Hipp Natal instant herbal tea for breastfeeding women
                                                                                                                          • Formula milk for lactating mothers could have a role to play
                                                                                                                            • Figure 43: Powdered milk formula for pregnant and lactating women
                                                                                                                            • Figure 44: Ibu chocolate flavoured milk powder for lactating mothers
                                                                                                                          • Formula makers could extend the product range to make up for the future loss from the infant formula segment
                                                                                                                            • Baby formula for toddlers between the age of one and three enjoys strong popularity among Chinese consumers
                                                                                                                              • There is opportunity for formula makers to compete in the liquid formula milk segment for kids
                                                                                                                                • Figure 45: Mengniu Future Star growing up liquid milk for kids three years and above
                                                                                                                              • What does it mean?
                                                                                                                              • Key Issue – Innovation Can Boost the Supplementary Baby Food Market

                                                                                                                                • Key points
                                                                                                                                  • The supplementary baby food market is about to take off in China
                                                                                                                                    • Supplementary foods can struggle to find shelf space…
                                                                                                                                      • …but online retailers offer hope to manufacturers
                                                                                                                                        • Figure 46: How Heinz advocate the advantage of its baby cereal products over scratch cooking on its official online store
                                                                                                                                      • Product innovation can bring incremental business to supplementary manufacturers
                                                                                                                                        • New flavours
                                                                                                                                          • Figure 47: Original taste Lactobacillus nutrient rice flour produced by Eastwes Company in China
                                                                                                                                        • New functionalities
                                                                                                                                          • Figure 48: Original taste Lactobacillus nutrient rice flour produced by Eastwes Company in China
                                                                                                                                        • New sub-categories
                                                                                                                                          • Figure 49: Baby soy sauce produced by Sweet Wheat Company
                                                                                                                                        • Premium quality
                                                                                                                                          • Figure 50: Organic Rice Milk Powder produced by Topfer, Imported to China
                                                                                                                                        • More scope to emphasise convenience
                                                                                                                                          • Figure 51: Share of new product launches of supplementary baby foods in China, the US and Japan, by claim, 2010 -13*
                                                                                                                                        • Packaging innovations can increase convenience
                                                                                                                                          • On-the-go packaging
                                                                                                                                            • Figure 52: Sieved Sweet Potato for Babies Aged 5 Months to Toddlers produced by Wakodo Company in Japan
                                                                                                                                          • Resealable pouches for dry baby foods
                                                                                                                                            • Figure 53: Tasty Smooth Oatmeal produced by Baby Gourmet Company in Canada
                                                                                                                                          • Microwaveable packaging
                                                                                                                                            • Figure 54: Pear Compote produced by Alpina Productos Alimenticios Company in Colombia
                                                                                                                                          • What does it mean?
                                                                                                                                          • Key Issue – How Can Domestic Formula Companies Rebuild Trust?

                                                                                                                                            • Key points
                                                                                                                                              • The new baby formula regulation puts emphasis on quality improvement
                                                                                                                                                • The standards for the authorisation of baby formula companies and products are going to be raised
                                                                                                                                                  • Production process management to be required for baby formula companies
                                                                                                                                                    • High standards to be set on baby formula quality inspections
                                                                                                                                                      • The new regulations bring hope to domestic baby formula companies
                                                                                                                                                        • Domestic firms are focussing on quality and brand-building…
                                                                                                                                                          • …but they will struggle to capitalise on the Fonterra scare
                                                                                                                                                            • Figure 55: Preference for local or international brands, March 2012
                                                                                                                                                          • In-depth co-operation with overseas milk suppliers/formula makers
                                                                                                                                                            • Acquiring foreign milk firms to take full control of overseas milk sources
                                                                                                                                                              • Building baby formula production factories overseas
                                                                                                                                                                • Unique and relevant product advantage helps build premium equity
                                                                                                                                                                  • Figure 56: Factors considered important when buying baby food, April 2013
                                                                                                                                                                • “Immunity-boosting” is the key purchase driver
                                                                                                                                                                  • Figure 57: How Biostime highlights the “LPN immunity factors” on its product packaging
                                                                                                                                                                • Natural ingredients can be exploited to drive premium perceptions
                                                                                                                                                                  • Capitalising on local knowledge and heritage
                                                                                                                                                                    • What does it mean?
                                                                                                                                                                    • Appendix – Usage of Baby Food

                                                                                                                                                                        • Figure 58: Frequency of serving baby food, April 2013
                                                                                                                                                                        • Figure 59: Frequency of serving baby food, April 2013 (continued)
                                                                                                                                                                        • Figure 60: Highest frequency of serving formula milk powder, by demographics, April 2013
                                                                                                                                                                        • Figure 61: Next highest frequency of serving formula milk powder, by demographics, April 2013
                                                                                                                                                                        • Figure 62: Highest frequency of serving goats milk powder, by demographics, April 2013
                                                                                                                                                                        • Figure 63: Next highest frequency of serving goats milk powder, by demographics, April 2013
                                                                                                                                                                        • Figure 64: Highest frequency of serving special formula milk powder, by demographics, April 2013
                                                                                                                                                                        • Figure 65: Next highest frequency of serving special formula milk powder, by demographics, April 2013
                                                                                                                                                                        • Figure 66: Highest frequency of serving kids ready-to-drink milk, by demographics, April 2013
                                                                                                                                                                        • Figure 67: Next highest frequency of serving kids ready-to-drink milk, by demographics, April 2013
                                                                                                                                                                        • Figure 68: Highest frequency of serving cereals, by demographics, April 2013
                                                                                                                                                                        • Figure 69: Next highest frequency of serving cereals, by demographics, April 2013
                                                                                                                                                                        • Figure 70: Highest frequency of serving fruit/vegetable/meat purees, by demographics, April 2013
                                                                                                                                                                        • Figure 71: Next highest frequency of serving fruit/vegetable/meat purees foods, by demographics, April 2013
                                                                                                                                                                        • Figure 72: Highest frequency of serving noodles, by demographics, April 2013
                                                                                                                                                                        • Figure 73: Next highest frequency of serving noodles, by demographics, April 2013
                                                                                                                                                                        • Figure 74: Highest frequency of serving baby snacks, by demographics, April 2013
                                                                                                                                                                        • Figure 75: Next highest frequency of serving baby snacks, by demographics, April 2013
                                                                                                                                                                        • Figure 76: Highest frequency of serving fruit juice, by demographics, April 2013
                                                                                                                                                                        • Figure 77: Next highest frequency of serving fruit juice, by demographics, April 2013
                                                                                                                                                                        • Figure 78: Highest frequency of serving dairy drinks, by demographics, April 2013
                                                                                                                                                                        • Figure 79: Next highest frequency of serving dairy drinks, by demographics, April 2013
                                                                                                                                                                        • Figure 80: Highest frequency of serving colostrum milk powder, gel tablets, by demographics, April 2013
                                                                                                                                                                        • Figure 81: Next highest frequency of serving colostrum milk powder, gel tablets, by demographics, April 2013
                                                                                                                                                                        • Figure 82: Highest frequency of serving multinutrient (eg DHA/fish oil/algal oil/vitamins gel/tablets/liquid), by demographics, April 2013
                                                                                                                                                                        • Figure 83: Next highest frequency of serving multinutrient (eg DHA/fish oil/algal oil/vitamins gel/tablets/liquid), by demographics, April 2013
                                                                                                                                                                    • Appendix – Reasons of Not Using Baby Food/Snacks/Drinks or Supplementary Food in the Last 12 months

                                                                                                                                                                        • Figure 84: Reasons for not using baby food/snacks/drinks or supplementary food in the last 12 months, April 2013
                                                                                                                                                                        • Figure 85: Most popular reasons for not using baby/kid’s drinks in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 86: Next most popular reasons for not using baby/kid’s drinks in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 87: Most popular reasons for not using baby/kid’s supplementary food in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 88: Next most popular reasons for not using baby/kid’s supplementary food in the last 12 months, by demographics, April 2013
                                                                                                                                                                    • Appendix – Brand Penetration and Loyalty

                                                                                                                                                                        • Figure 89: Brands of baby foods purchased in the last 12 months, April 2013
                                                                                                                                                                        • Figure 90: Most popular brands of baby foods purchased in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 91: Next most popular brands of baby foods purchased in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 92: Other brands of baby foods purchased in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 93: Brands of baby foods most often purchased in the last 12 months, April 2013
                                                                                                                                                                        • Figure 94: Most popular brands of baby foods most often purchased in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 95: Next most popular brands of baby foods most often purchased in the last 12 months, by demographics, April 2013
                                                                                                                                                                        • Figure 96: Other brands of baby foods most often purchased in the last 12 months, by demographics, April 2013
                                                                                                                                                                    • Appendix – Popular Features of Baby Food Products

                                                                                                                                                                        • Figure 97: Appealing elements of baby foods, April 2013
                                                                                                                                                                        • Figure 98: Most popular appealing elements of baby foods-rank 1, by demographics, April 2013
                                                                                                                                                                        • Figure 99: Next most popular appealing elements of baby foods-rank 1, by demographics, April 2013
                                                                                                                                                                        • Figure 100: Most popular appealing elements of baby foods-rank 2, by demographics, April 2013
                                                                                                                                                                        • Figure 101: Next most popular appealing elements of baby foods – rank 2, by demographics, April 2013
                                                                                                                                                                        • Figure 102: Most popular appealing elements of baby foods – rank 3, by demographics, April 2013
                                                                                                                                                                        • Figure 103: Next most popular appealing elements of baby foods – rank 3, by demographics, April 2013
                                                                                                                                                                    • Appendix – Channels of Buying Baby Food Products

                                                                                                                                                                        • Figure 104: Venues of purchasing baby foods, April 2013
                                                                                                                                                                        • Figure 105: Most popular venues for purchasing baby foods, by demographics, April 2013
                                                                                                                                                                        • Figure 106: Next most popular venues for purchasing baby foods, by demographics, April 2013
                                                                                                                                                                    • Appendix – Attitudes towards Baby Food

                                                                                                                                                                        • Figure 107: Attitudes to baby foods, April 2013
                                                                                                                                                                        • Figure 108: Most popular attitudes to baby foods, by demographics, April 2013
                                                                                                                                                                        • Figure 109: Next most popular attitudes to baby foods, by demographics, April 2013
                                                                                                                                                                        • Figure 110: Other attitudes to baby foods, by demographics, April 2013

                                                                                                                                                                    Companies Covered

                                                                                                                                                                    To learn more about the companies covered in this report please contact us.

                                                                                                                                                                    Baby Food - China - July 2013

                                                                                                                                                                    £3,273.18 (Excl.Tax)