China’s Infant Milk Formula Market: Demographic and Regulatory Changes Drive Value Growth and Consolidation

Despite a more relaxed policy that allows Chinese families to have three children, it seems likely that China’s birth rate will remain lower than expected. Consequently, we expect China’s infant milk formula market to register a negative volume growth rate in the coming years, as the country approaches a critical demographic inflection point. But this is not the end of the world. China will remain one of the largest infant milk formula markets globally, and we expect the demographic headwinds are likely to drive value growth over volume growth. Furthermore, regulations have tightened in recent years, and the new national standards implemented in February 2023 have set an even higher entry barrier. We expect the new national standards to accelerate market consolidation. Both onshore and offshore players need to be aware of the strategic implications and adapt to the changing environment.