China Food

Viewpoint | song Liang, an independent dairy analyst: confidence in the milk powder market is the most important at present

本文作者为独立乳业分析师宋亮

Recently, the article “experts warned against the impact of formula marketing on breastfeeding” caused an uproar in the market, causing the stock price of listed dairy companies to fluctuate. It is suggested that due to the excessive marketing of formula milk powder, there are exaggerated and induced publicity, resulting in the low rate of breastfeeding.

The purpose of experts’ appeal is to let consumers choose breastfeeding as much as possible, and warn some milk powder enterprises in the current market of exaggeration and induced publicity. There is no need for the market to cause panic.

There are objective reasons for the continuous decline of breastfeeding rate in China in the past 20 years. The breastfeeding rate dropped from 70% in 2000 to about 30% in 2015, mainly because more and more women got rid of their families and began to work, especially women in the third and fourth tier and rural areas went out to work. It is precisely these 20 years that China’s economy took off. However, in the past five years, women’s work and residence have been stable. At the same time, more institutions, nutrition experts, and even leading enterprises such as Wyeth, Mead Johnson and flying crane are calling for breastfeeding. A large amount of information on baby rearing, nutrition and breast milk has formed a huge education system on the Internet, and more and more women begin to pay attention to and choose breastfeeding. Therefore, the breastfeeding rate began to increase slowly in the past five years, and the dynamic sales volume of a section of milk powder produced by enterprises was declining. According to rough statistics, it decreased from about 300000 tons in 2015 to about 150000 tons in 2020.

Some enterprises exaggerate and induce in advertising and promotion to improve sales performance, but this will only lead consumers to shift from one milk powder to another brand. Objectively speaking, in today’s era of highly developed information, more and more consumers have understood the importance of breastfeeding, but milk powder is just needed to some extent. At present, about 60% of mothers combine breast milk and milk powder, and most of them are weaned to milk powder after 6-8 months. The main reasons are that on the one hand, pregnant women lack milk due to physical reasons, on the other hand, maternity leave is limited, and they have to wean to milk powder due to the urgent need to return to their working role; Secondly, there are infants born in China who are deeply intolerant to lactose and milk protein and premature infants. These infants must use specially formulated milk powder according to the guidance of doctors and cannot use breast milk completely. According to the statistics of China’s Working Committee for caring for the next generation, premature infants account for as much as 10% of the whole birth population.

In view of the illegal publicity of some enterprises, the state urgently needs to launch a new version of the management measures for breast milk substitutes, which will help the better development of professional high-quality enterprises, enable enterprises to focus more funds and energy on professional nutrition research, scientific research and technology application, and make excellent enterprises more competitive. Milk powder has its particularity. Firstly, it is a professional nutritional product, so its products need to be introduced to consumers by professionals; Secondly, milk powder is “people who buy don’t eat, people who eat don’t buy”, and there is no explicit difference in products, which can allow consumers to judge intuitively; Thirdly, consumers have to change a batch every three years. Unlike other consumer goods, products and brands can be known and used for life. Therefore, this requires consumers to have full trust in products and brands, and enterprises to continuously promote their products and brands to new users every at least three years. Therefore, in order to strengthen consumer cognition and trust, enterprises should do professional consumer education and transfer nutrition and parenting knowledge to consumers to enhance trust, which is no problem.

However, the boundary between product marketing exaggeration, induced publicity and professional consumer education is blurred, which is easy to confuse this induced purchase behavior with normal consumer education. Therefore, it is necessary for the government to formulate clear and detailed new management regulations to curb and crack down on violations in the future, but on the other hand, do not over correct, and maintain the legitimate consumer education activities of brand enterprises.

In recent years, the birth rate has declined, the overall ceiling of the milk powder market has appeared, and the recent frequent rumors of policies interfering with the market have made some capital investors lose confidence. Personally, in today’s market environment, milk powder is still a good industry compared with other industries. From several aspects: first, the improvement of breastfeeding rate will not affect the long-term performance of enterprises. With the improvement of economic conditions and the stability of family environment, breastfeeding in China will eventually return to the normal level in the future, that is, the rate of pure breastfeeding in 0-6 months will reach more than 50%, which is directly related to a country’s economic development and demographic changes. At the beginning, breastfeeding in Europe, America, Japan and other countries also experienced a process of returning from high to low. Therefore, for milk powder enterprises, the most important thing in their market at present and in the future is no longer the breastfeeding infants from 0 to 6 months, but the infants, young children, children and adolescents after 6 months, and even the middle-aged and elderly. This is the concept of “whole family and full nutrition” I talked about at the beginning.

Second, enterprise transformation will promote sustainable development in the next stage. It is very difficult for the sustainable growth of infant formula milk powder in the future, but the business scope extended from medium and short-term leading enterprises to children’s and middle-aged and elderly milk powder can ensure the stable growth of performance in the next 2-3 years under the stable market channel. In 3-5 years, the enterprise will fully advance from traditional milk powder production to professional nutrition, and catch China’s great health bus, so as to realize long-term sustainable development in the future.

Third, core leading enterprises build industrial clusters locally. Local governments accelerate the green development of local economy. The most important thing is to build industrial clusters around Yili, Mengniu, JUNLEBAO and Feihe in Inner Mongolia, Hebei and Heilongjiang, so as to achieve high added value, green and sustainable development of agriculture and animal husbandry. Therefore, local governments, enterprises and social capital will increase investment, and the resulting dividends can enable enterprises to survive the industry downturn this year and next.

Fourth, the government will not intervene in the market by non market means. The theory of price limit is the thinking of planned economy. Unless under extremely special circumstances, the government will limit the price of core products. In normal times, price limit is not in line with the government’s thinking and method of market management. Whether it is food, oil and meat related to people’s livelihood, or energy such as electricity and gasoline, and even special drugs, they have not directly intervened in the market and limited prices. The state regulates the grain, oil and meat market by collecting and investing reserves, ensures that energy can float relatively freely by formulating step prices, and solves the problem of purchase demand by incorporating special drugs into medical insurance. Although infant formula milk powder is also a relatively special product, its market concentration is increasing, full of vitality and full competition. At the same time, the competition urges enterprises to speed up the investment and R & D of basic nutrition and professional technology. For this market, if the price is directly limited, the market will lose vitality and enterprises will lose the power of R & D and innovation.

As for the problem of falsely high prices, the essence of the price war in the past two years is to gradually promote the reasonable return of milk powder prices to their values. The price of a can of milk powder 220-280 is the mainstream price accepted by most, which is the result of repeated action by the market.

At this moment, confidence is the most important for the industry. Capital institutions should have confidence in the transformation and development of milk powder enterprises, the government should have confidence in the self-regulation ability of the market, enterprises should have confidence in passing the trough period, channel providers should have confidence in adjusting the market and safeguarding the legitimate interests of channels, and most importantly, consumers should have confidence in the safety and quality of milk powder. The government should speed up the regulation and restraint of bad market competition behavior, especially for exaggerated publicity and induced consumption behavior, so as to ensure that the market competition is relatively fair.

Pay attention to “snack generation (wechat: foodinc)” and watch the wonderful news.


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