The Easy Money Has Been Made
Rabobank expects the growth in China’s infant milk formula market to taper off between 2015 and 2020. After a decade of rapid growth (albeit from a low base), a continued growth at a much slower rate is expected over the next five years. The relaxed birth policy has only met with, at best, a lukewarm response from young parents and is unlikely to be a major boost to potential IMF demand growth.
In the meantime, competition is likely to further intensify, with both onshore and offshore capacity expansions underway, mostly targeting the Chinese market. With the Chinese IMF regulations significantly increased in the last 18 to 24 months, both domestic and overseas players are making strategic shifts to meet the challenges of the new market norm and to cope with regulatory uncertainties.
This is on top of the ongoing need for consistent attention to quality and safety, and evolving distribution channels in China. All of these would require significant investment, which will likely result in lower returns than in the past. While there is still profit to be earned by the well-prepared, the easy money has certainly already been made.
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Sandy ChenSenior Analyst - Dairy