The "domestic substitution" of infant formula powder slowed down, and the performance of foreign milk powder recovered collectively

　　Author: Luan Li

　　After experiencing the crisis of declining market share for several years, foreign milk powder brands are regaining growth.

　　Recently, the 2022 financial reports of Nestlé, Danone, FrieslandCampina, A2 and other major foreign-funded dairy companies have all been released. At their performance meetings, the performance of the Chinese market has also become a key "praise" part of the management of foreign-funded dairy companies.

Under the epidemic situation, foreign-funded dairy companies are taking advantage of their brand advantages and adopting more active competitive strategies, such as e-commerce and channel sinking, to seize market share from domestic milk powder.

Performance recovery of foreign-funded dairy companies

　　As the market continues to shrink and competition intensifies, 2022 will be a difficult year for milk powder brands. However, the recent financial reports of a number of foreign-funded dairy companies show that their Chinese milk powder business has performed better than market expectations.

　　Recently, Royal FrieslandCampina of the Netherlands announced its 2022 financial report. The revenue of the professional nutrition business was 1.279 billion euros, a year-on-year increase of 17.8%. Special mention of the Chinese market.

According to Nielsen retail data, in 2022, Meisu Jiaer's market share in the Chinese market will increase to 6.8%, and its market ranking will also rise to the fifth place.

In 2023, FrieslandCampina will regard China as one of the five key development markets for its infant business.

　　The financial report shows that in 2022, the revenue of Nestlé Greater China will be 5.4 billion Swiss francs, a year-on-year increase of 3.4%. , especially after adjusting the distribution system and distribution channels, Nestlé’s infant formula business has achieved nearly double-digit growth.

The reporter noticed that this has also reversed the continuous decline in Nestle's infant formula business since 2020.

　　The situation is similar for Danone.

In 2022, the revenue of China, North Asia and Oceania, where Danone China is located, will be 3.43 billion euros, a year-on-year increase of 6.7%. Among them, Danone's milk powder business will achieve a single-digit growth year-on-year in the case of a high base in the Chinese market in 2022. The market The share has also increased by 60 basis points. Danone management predicts that 2023 will still be a year of growth for the milk powder business.

　　The semi-annual report for the 2023 fiscal year (six months ended December 31, 2022) released by a2 milk company shows that its revenue and profit have achieved double-digit growth, although the sales volume of China's infant milk powder market fell by 12.5% ​​during the period. %, but the sales of a2 milk infant formula still increased by 18%, and achieved growth in both mother and baby stores and online channels in China.

Among them, the sales of the Chinese label product "a2 to the beginning" was 270 million New Zealand dollars, a year-on-year increase of 43.5%.

The situation of "domestic substitution" has changed

　　The performance of foreign milk powder brands has also brought about some new changes in the domestic infant formula market.

　　In the past few years, there has been an obvious round of "domestic substitution" in China's infant formula market.

Before 2016, foreign brands accounted for more than 60% of the market share in China's infant formula market. The market share of milk powder has already surpassed that of foreign milk powder brands.

　　A person in charge of a domestic milk powder brand told the first financial reporter that in the previous market competition, the offline distribution and sales of traditional strong foreign milk powder brands such as Abbott and Wyeth were not good, which also led to confusion in their market prices and lack of competition. Advantage.

　　According to Nielsen data, among the top ten milk powder brands in the first three quarters of 2022, foreign brands have a market share of 31.6%, while domestic brands have taken 48%.

　　After experiencing the chaos in the early stages of competition, foreign brands seem to have found a solution.

　　On the one hand, major foreign-funded brands have adopted a more proactive competitive strategy to accelerate competition with domestic brands for market opportunities in the 3rd to 5th tiers.

　　Starting from the second half of 2021, including FrieslandCampina, Danone, etc., have started a new round of channel sinking. Compared with the previous round of simply increasing distribution channels in the offline market, this round of channel sinking has been greatly reduced. At the business level, although the mechanism is still not as flexible as that of domestic brands, it has solved the problem of low profits in foreign milk powder brand channels, which is one of the main reasons why traditional offline channels did not accept foreign brands.

　　At the performance meeting, the management of FrieslandCampina said that by expanding distribution to low-tier Chinese cities, FrieslandCampina has also increased its market share in the Chinese market, which has also driven the overall growth of the operating profit of the professional nutrition business.

　　A2's financial report also shows that the share of a2's mother and baby stores in low-tier cities has grown the fastest since the beginning of the year, increasing from 1.9% in December 2021 to 2.5% in December 2022, an increase of 32%.

As of December 2022, the company has 27,000 offline distribution stores, most of which are located in lower-tier cities.

　　At the same time, changes in consumption channels under the epidemic are also beneficial to foreign brands with stronger brand power.

Song Liang, an independent dairy industry analyst, told CBN reporters that due to the impact of the epidemic in 2022, consumers’ consumption habits tend to be online. Foreign brands use online to accelerate the expansion of third- and fourth-tier markets, and the growth of domestic brands is also facing new competition. pressure.

　　The above-mentioned person in charge of domestic milk powder also confirmed that the brand influence of foreign-funded milk powder is relatively strong, so the competitive advantage in the online market is obvious.

　　On the other hand, in order to seize the growth opportunities brought about by the increase in the concentration of the 3rd to 5th tier milk powder market, most of the domestic milk powder brands have adopted relatively aggressive market strategies before, and seized the market by means of overstocking. The population declines, the domestic milk powder market shrinks as a whole, and problems such as chaotic prices and cross-selling of goods brought about by the growth of suppressed goods gradually become prominent.

In mid-2022, China Feihe and Ausnutria have all carried out a round of destocking operations, which also had a negative impact on short-term performance growth.

At the same time, these changes have also caused some dealers to fall into the camp of imported brands whose market is relatively stable.

　　Some dealers complained to the first financial reporter, saying that there are still several months of inventory in the warehouse that has not been digested. At the end of the year and the beginning of the year, a well-known domestic milk powder manufacturer forced the dealer to double the payment to achieve a "good start", which is really difficult to do.

　　Chen Ge, President of FrieslandCampina China, said in an interview with a reporter from China Business News that with the help of digitization and supply chain upgrades, the accuracy of FrieslandCampina product demand forecasts has increased from 60% in the past few years to more than 80% by the end of 2022. The improvement of efficiency leads to the improvement of the product validity period. The products can be sold in the Chinese market within 2 months at the earliest after being produced abroad, and the overall inventory balance is maintained at a benign level.

　　When the reporter visited some milk powder sales channels, he also found that the product expiration date of some domestic brands at the bottom of the tank is not more ideal than that of foreign brands that have traveled across the ocean.

　　In Song Liang's view, foreign brands have continuously controlled goods and stabilized prices in recent years. This approach has boosted the confidence of the channel. At the same time, the prices faced by consumers are also more stable, and it is easier for consumers to rest assured.