Rock’n the Cradle: Clouds Over China’s Infant Formula Sector Outlook

China began easing its once strictly enforced one-child policy as far back as 2013. However, this has not prevented birth rates from falling over the last four years. Anecdotal evidence during the first half of 2021 suggests a strong likelihood of yet another double-digit decline in the number of births for the entire year. Demographic headwinds aside, competition, regulatory risks, and now possible ‘premiumization’ pressures due to limited differentiation pose structural uncertainties over the future growth of the infant milk formula (IMF) sector. This implies that the Chinese IMF market faces the risk of a softer outlook for revenue and margins if players are unsuccessful in executing their chosen strategies. As a result, IMF companies serving the Chinese market should note that times are changing from both a market and a regulatory perspective.