Recently, a number of foreign milk powder brands have announced their latest performance. Although the domestic milk powder market has shrunk as a whole, the trend of slowing or declining performance of foreign milk powder brands is gradually changing.

The first financial reporter learned that major foreign milk powder brands including Royal FrieslandCampina, Danone, Wyeth, A2 and other major foreign milk powder brands are promoting a new round of channel sinking, and are preparing to "grab territory" in the 3rd-5th tier market and domestic milk powder brands.

Foreign milk powder performance recovers

　　2021 will not be an easy year for major milk powder brands at home and abroad, but the performance of foreign dairy companies such as FrieslandCampina, Nestle, and A2 recently announced is better than market expectations.

　　According to the announcement, FrieslandCampina's revenue in 2021 will be 11.5 billion euros, a year-on-year increase of 3.2%, and its operating profit will be 360 ​​million euros, a year-on-year increase of 32.5%. The growth rate of the Chinese market is higher than the global level.

　　Chen Ge, President of FrieslandCampina China, told the First Financial Reporter that FrieslandCampina China’s annual net turnover and net sales maintained double-digit growth. Among them, the sales of professional dairy products in the Chinese market in 2021 will increase by more than 30%, and professional nutrition The product business (including the milk powder business) maintained a single-digit growth, and the core large single product Royal Mesojiaer increased by more than 50%.

　　During the same period, A2 Milk's results for the six months ended December 2021 showed that sales of A2 Chinese-label milk powder began to pick up in the second quarter after a decline caused by destocking in the first quarter of the fiscal year.

In the first half of fiscal year 2022, Chinese-label A2 infant formula sales were NZ$190 million, down 11.4% year-on-year, but double-digit growth was achieved in the second quarter; milk powder market share also reached 3.2% in December 2021 an all-time high.

　　Nestle also recently announced its full-year results for 2021. The sales revenue in the Chinese market was 5.56 billion Swiss francs, or about 39.2 billion yuan. Among them, the market share of cooking, coffee and pet food is growing, but the market share of baby nutrition is still high. slipping.

However, at the analyst meeting, Nestle CEO Schneider said that Nestle will not sell the milk powder business, and has adopted a new strategy, which is expected to show results in 2022.

　　The reporter noticed that the trend of the above-mentioned dairy companies' financial reports is different from that in the first half of 2021.

　　Nielsen’s offline (maternal and infant + supermarket) milk and infant formula data released by Nielsen from January to May 2021 shows that the market share of several major foreign brands has declined to varying degrees. The rate of decline was smaller, at 0.3% and 0.4%, while Wyeth, Mead Johnson and Abbott's market shares fell by 2.1, 1.9 and 1.1 percentage points, respectively.

In the first five months of this year, the market share of offline domestic milk powder increased from 31.4% to 39.6%, while the market share of foreign milk powder fell by 6 percentage points to 32.9%.

Battle of the low-tier market

　　The previous decline in the performance of foreign milk powder brands was due to the shrinking domestic milk powder market on the one hand. The number of births in 2021 will be 10.62 million, which is about 40% less than the 18.83 million in 2016; The fierce competition brought about by the rise of domestic milk powder brands Yili, Junlebao, Feihe, etc. The latter harvested small and medium-sized brands in the third- to fifth-tier market and seized market share, while foreign brands have not been able to make a breakthrough in the low-tier market.

　　According to Kantar Worldpanel's survey data, in the first half of fiscal year 2022 (i.e. from June to December 2021), the size of China's overall infant formula market fell by 5%. The survey found that the decline in the first-tier market where foreign milk powder brands dominated Obviously, it fell by 6.6%, but the 2nd, 3rd and 4th tier markets were flat.

　　The performance changes of foreign milk powder brands may be related to strategic adjustments including a new round of channel sinking.

　　Foreign milk powder brands tried to promote the sinking of the channel around 2018, but ultimately failed due to acclimatization. However, starting from the second half of 2021, foreign milk powder brands changed their strategies and hoped to seize opportunities in the low-tier market. Saw some changes.

　　FrieslandCampina's financial report shows that China's lower-tier cities have huge growth potential, and the infant formula market share is as high as 55%. It has expanded to 162 lower-tier cities, and in the fourth quarter of 2021, the proportion of frequent purchases in the Philippines has exceeded 10% of the sales of FrieslandCampina's infant formula business in China.

　　According to Chen Ge, channel sinking is still under exploration. The new model is different from the previous model of sinking through dealer channels. The business has been split. On the one hand, it takes advantage of the digital and brand advantages of foreign milk powder brands. , connect stores and consumers; on the other hand, provide logistics and other service support through professional service providers.

At present, this model has been welcomed by the market, so this year will further promote the implementation of this strategy.

　　During the market visit, the reporter learned that Danone's new round of channel sinking is also flattened through Internet technology to avoid multi-level distribution.

From the perspective of the industry, this model reduces the distribution link, thereby enhancing the competitiveness of foreign milk powder products in the channel with domestic brands.

　　Not only FrieslandCampina and Danone, Nestlé's new plan includes increasing the influence of its products in lower-tier cities; in addition, A2 has also increased its investment in lower-tier cities to seek higher penetration, as of 2021 At the end of December, the number of a2 distribution stores in China had increased from 228,000 at the end of June 2021 to 246,000.

　　Song Liang, an independent dairy analyst, told the First Financial Reporter that foreign milk powder brands cannot give up the low-tier market under the stock competition. At present, the new strategies of each company have achieved some results, but in the long run, the offline market is domestic milk powder brands. The main battlefield, the next step will be very fierce competition.

　　It is worth noting that the results of the competition in the third- to fifth-tier markets may determine the future ranking of the domestic milk powder market. The reporter learned that at the beginning of this year, some domestic big brands have begun to ask dealers to double the payment and promote new customers. Buy-one-get-one-free promotions will further squeeze and grab the market share of small and medium-sized brands and accelerate the market reshuffle, while the sales of small brands in 2021 will be less than 30% to 40% of the previous ones.

　　In Chen Ge's view, the reshuffle and centralization of the milk powder industry will not stop in the next 5-10 years. According to Nielsen data, the current market share of the top ten in the industry is about 75%, and it may be 75% in the next 5 years. The market share is only from 5 or 6 brands.

The next stage of market competition has entered the stage of all-round competition, which will examine the comprehensive strength of enterprises in branding, digitalization, channel management, formula registration, and quality.

　　"The third- to fifth-tier markets are now in a state of competition for every inch of land." Song Liang said, with the expansion of the offline market business of foreign brands and the promotion of e-commerce, especially the official cross-border purchase business, consumers are paying attention to The point may be the same as the first and second lines, and gradually turn to multi-dimensional considerations such as formula, product function and consumer education. The medium and long-term market pattern remains to be seen.