1. One-Child Policy Shift Benefits Infant Formula Industry
Summary: China will relax its one-child policy, allowing couples to have two children if one of
the parents is a single child, a move which is expected to be beneficial for the infant formula
industry.
Tag: grain & food processors, General Administration of Customs of China, local food safety
standards, dairy farming, UHT milks, infant formula product, the State Council
According to Dairy Products China News issued by CCM in December 2013, China will relax
its one-child policy, allowing couples to have two children if just one of the parents is a single
child, according to a key decision approved at the Third Plenary Session of the 18th
Communist Party of China Central Committee on 15 November. This policy shift is expected to
lead to more newborns, so the infant formula industry will benefit from this.
The timetable for implementation of the policy has not been fixed, the document just saying
that it would gradually adjust and improve family planning policy to balance the population
number in China.
China’s family planning policy was first introduced in the late 1970s to control the surging
population by limiting most urban couples to one child (some provinces allowed a second child
if couples were both single children) and most rural couples to two children (if the first child
was a girl).
The changes in policy have aroused people’s attention. Many internet users have welcomed
the change, though others have said they would think twice about having a second child
because of high living costs. Listed companies involved in mother and child supplies have
seen a surge in their shares – Yili, Beingmate and Xinjiang Western Animal Husbandry Co.,
Ltd., (a recent entrant to the infant formula market) all saw their shares rise significantly on 18
November but fall back on the next day.
China saw 16.35 million births in 2012, and population experts estimate that the policy shift will
add 1 to 2 million more to the annual total in the next 2 years. Various observers have
suggested that the impact will be an additional RMB6 billion of sales every year from 2015, or
an increase in sales for the industry of 20-30% (sales of infant formula reached about RMB55
billion in 2012).
The extra sales are expected to occur particularly for domestic brands of infant formula. The
new policy will especially encourage more second children in 3rd and 4th tier cities, as in 1st
and 2nd tier cities many couples are less willing to have a second child due to economic
pressures and because the traditional perception in China that “more children is better” has
weakened there more than elsewhere. It is evident that the multinational brands are typically
much stronger in the latter cities (on the basis of this data, only 16% of their sales are in
3rd/4th tier) whereas domestic brands hold higher shares in the 3rd and 4th tier cities (which

2. make up 55% of their sales).
However, some industry experts take a conservative view of the new policy’s impact, based
principally on several areas of uncertainty. Firstly, no timetable for implementation of the new
policy has been fixed. According to the National Health and Family Planning Commission
(NHFPC), the central government will not set a confirmed timetable for the provinces and local
governments will determine the timing according to what they judge to be practical locally. This
means that it is possible in theory that only some provinces will fully implement this new policy
in the future, with others holding back from doing so. Additionally, many couples seem to be
concerned about the high cost of child-rearing: several surveys on this topic conducted by the
NHFPC have suggested that 60% of the respondents on average are willing to have a second
child if the policy permits. As a result, the increased number of newborns is uncertain, so the
infant formula industry will be wise to take a conservative view of the prospects offered by this
policy change.
Table of Contents of Dairy Products China News 1311:
Cheese Market Growth
Domestic Dairy Processors Raise Product Prices
Revised Draft of Food Safety Law Announced
One-Child Policy Shift Benefits Infant Formula Industry
YST Launches IPO
Tingyi and Wakodo to Form JV
Meiji Dairies Targets Fresh Milk and Yoghurt
New Hope Dairy Re-enters Infant Formula Market
Synutra to Acquire YouthbaseBeingmate Diversifies into Children’s Milk Market
Beingmate Diversifies into Children’s Milk Market
Guangda Group to Expand Milk Supply
Vitasoy Launches Grain Milk
Dairy Products China News, a monthly publication issued by CCM on 15th, offers you the
latest information on new market dynamics, company development, new products, technology,
packaging and raw material supply, etc. It also focuses on the government’s direction and
polices, helping you get the whole picture of the industry.
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