The infant milk powder market has set off a price war, and the merchants bluntly fight for the "bleeding" speed
"This year's competition is a bit disorderly, and the fight is for the speed of "bleeding". Whoever lasts for a long time can survive." Zhang Mingjie, the manager of Hubei province, an imported milk powder brand from Australia, is experiencing the darkest moment in the market. "In the past, the promotion was buy 5 get 1 free, and buy 6 get 1 free. Now all brands can't hold on. Many domestic milk powders are buy 2 get 1 free, or even buy 1 get 1 free.
Affected by factors such as the decline in the birth rate, the weakening of purchasing power, the pre-hoarding of goods to be digested, and the company's recovery performance, the infant milk powder market has started a price war since the second quarter of this year. The market space and channel prices are chaotic, and brands, palletizers, distributors, and channel vendors have all been affected.
The industry predicts that the key factor determining whether the milk powder price war can continue is the impact of the epidemic.
If the epidemic continues for too long and consumers become accustomed to low prices, it will be difficult for milk powder prices to rise in the future, or there will be no high gross profit at all.
All channels start a price war
"Now that the price war has spread to the entire industry, everyone is looking for vitality in the smallest space." Zhang Mingjie told the Beijing News reporter, "If it were not for the epidemic, there was a saying in milk powder marketing in 2020, saying,'The future consumption level is inevitable. The upgrade is just a mismatch between the existing production and supply chains. Now the epidemic has changed the market pattern in the short term."
A reporter from the Beijing News visited Beijing Supermarket on October 29 and found that Abbott, Mead Johnson, Misugar, Yili and other infant formulas all have different degrees of discounts, ranging from 15% to 10%.
On the e-commerce platform, the original price of Wyeth's Qifu section 3 was 409 yuan, and the current price is 339 yuan. In the last week of October, the promotional activities of "Purchase Milk Powder Card up to 150 yuan free" and "Buy 2 cans get 1 can of 350 grams" ; The original price of Aita Metso Cui 3 is 356 yuan, the current price is 297 yuan, and there is also a free gift; the pre-order price of the 7 sets of Jiabei Aite infant formula milk powder is 2060 yuan, and the purchase of 1 set is free of deposit 100 yuan, after discount The price is 295 yuan per can, plus children's motorcycles, 800 grams of high-calcium milk powder 1 tin, etc.
In this round of promotion wars, the benefits consumers get are obvious.
On October 27th, Mr. Cui bought 4 cans of a certain brand of three-stage milk powder from Jingdong Supermarket at a price of 158 yuan per can. Not only did he save 32 yuan in cost, he also received two barrels of edible oil. "I checked. It costs 39.9 yuan per barrel of oil, which is equivalent to saving nearly 80 yuan."
Compared with the benefits of consumers, the performance of many milk powder brands is under pressure.
The third quarterly report for 2020 shows that in the Chinese market, sales of Nestlé’s Wyeth infant milk powder in the Chinese market continue to shrink.
Due to the high base in the same period last year, China's milk powder business experienced a double-digit decline, causing the French milk powder giant Danone's global special nutrition sales revenue to fall by 5.7% in the third quarter, of which sales and sales fell by about 2.9%.
The management of Mead Johnson's parent company, Reckitt, pointed out at the three-quarter report performance briefing held not long ago that China's infant milk powder market is fiercely competitive and showing a trend of slowing high-end.
"There is evidence that due to some behavioral changes related to the epidemic, the birth rate will decrease in the next few quarters, which is expected to have an impact on our infant nutrition business growth in 2021."
The price competition in different channels is becoming more intense, which will affect the profit margin of the nutrition business.
"Sequences" of the epidemic appear
Zhang Mingjie believes that the formation of the current milk powder price war is related to the "sequelae" of the epidemic.
First of all, the sales of e-commerce channels in the early stage of the epidemic have increased sharply, and consumers have hoarded a large amount of milk powder to digest; second, since August, all companies have been doing sales tasks to backflush to compete in volume; in addition, some consumers have purchasing power Decline; finally, the first batch of products that passed the formula registration in 2017 need to be re-submitted in 2021. Because the registration fee is not low, many small brands with annual sales of less than 100 million are likely to give up not to do it, and thus carry out clearance and price reduction this year deal with.
"The whole industry is cutting prices and can only follow along." A channel dealer said frankly, "No one wants to fight a price war, but now we have to consider the purchasing power of consumers. In the past, consumers were hoarding large orders. Cans of milk powder, there are no such customers now, at most 12 cans per order."
"This year's baby powder market, especially the high-end baby powder market, has slowed down, and many brands will see both volume and price drops. This situation will become more apparent in the fourth quarter." Nian Yong, independent commentator for the mother and baby industry Wei believes that many infant powder companies’ sales in the first quarter have been greatly affected, and they are desperately fighting for the market to make up for the loss of sales. Therefore, the market promotion is very strong, and the vigorous promotion has overdrawn part of the consumption. difficult".
From the brand perspective, domestic high-end milk powder brands represented by Feihe have obvious channel advantages, while joint venture and imported brands have encountered great obstacles offline.
This has also been confirmed by Jiangxi milk powder distributor Wang Xiaogang, “Our township milk powder market has been dominated by several major domestic brands. Feihe can account for 30%-40% of the market. Yili is also selling well. Baoxin’s A2 milk powder is even sold out. Even if some high-end milk powder is on sale, county consumers will not easily switch brands. They will ask how long the event will last and consider their future purchasing power."
Price disorder intensifies
It is worth noting that the price war on milk powder has spread from high-end and ultra-high-end categories to all price segments, and brands, palletizers, distributors, and distributors have all been affected.
According to Zhang Mingjie’s understanding, “a certain brand of milk powder produced in Europe at an original price of 400 yuan/can can achieve the lowest price of 200 yuan after discount. Not only does it squeeze out its own waist price range, the living space of other brands is also smaller. This is tantamount to a dimensionality reduction blow to the entire market."
“Now it’s going to be “short and fast”. Sell the goods quickly, and I’m afraid of overwhelming.” As a regional distributor of three series of domestic milk powder brands, Wang Xiaogang was asked to pick up the pallet under the brand in the second quarter of this year. Inventory of other series of milk powder.
Due to the poor sales of this part of the supply, and the sales cannot be included in the provincial tasks, it also squeezed the sales of the original products, which led to its failure to complete the business assessment in the second and third quarters, and the brand was finally disqualified as a distributor.
“There’s no regret if you don’t make this brand, because its entire price system has collapsed. Now the goods in the hands of pallet vendors are about to expire, and they are thinking of ways to ship. The wholesale market is their goods, and every channel is very cheap. Distributors can’t do it.” Wang Xiaogang revealed that many brands are now playing the trick of dressing up and increasing prices. “These dealers are dead, and they’re going back to change the packaging of the products, increase the ex-factory price, and then switch to another batch. The distributor, the brand has nothing to lose."
According to industry insiders, "pallets" originally meant that pallet dealers entrusted traders to order or sell goods as agents, and played the role of advancing funds for traders.
However, in actual operation, some milk powder "pallet merchants" do not have the ability to sell goods, and only act as "capital turnover and warehouse stocking".
In addition, the channel price disorder of some foreign milk powder has also been criticized by maternal and child stores.
A small and medium-sized maternal and child shop owner in a county told the Beijing News reporter that taking a well-known foreign milk powder product as an example, its suggested retail price is 299 yuan, and the wholesale price for maternal and child stores is 270 yuan. It is for wholesale markets and some maternal and child e-commerce companies. The wholesale price of the platform is 120 yuan, while the promotional price of the official flagship store can be as low as 150 yuan. “We have no price advantage at all, so now I don’t do many large foreign brands.”
The mother and baby shop owner further explained that some traditional foreign brands are "tradable goods", that is, every store has purchases, and the competition is fierce, the price is completely transparent, a can of milk powder can only make a profit of 5-10 yuan, and there is no corresponding Customer acquisition cost support.
In contrast, although the “market goods” of the top domestic milk powder brands are also marginally profitable, they can provide cost support and can drain the store. In the process, the shopkeeper can recommend consumers of the same brand. Other high-margin products.
Zhang Mingjie said frankly, "In the past, chaotic prices may be caused by dealers, but now stores are also chaotic. The entire infant milk powder industry has become a dual competition of channels and brands." Tang Li, founder of the "Dad Love" mother and baby chain, was previously accepting The Beijing News reporter also judged in an interview that this year will be a turning point in the infant milk powder market. Channel changes are accelerating. The third and fourth-tier milk powder market will gradually shift from the past channel-driven to a dual-driven "channel + brand".
The price war may last until next year
Compared with today’s price-cutting promotions, my country’s infant milk powder market ushered in a wave of “price increases” last year. Feihe “Xingfeifan”, Ausnutria “Jiabeiite”, a2 “Platinum Edition”, etc. Foreign head milk powder brands have raised prices. Yili, Jianhe Group, Junlebao and other companies have also launched high-end sub-categories such as goat milk powder or organic milk powder, and A2 protein milk powder.
A person in charge of a milk powder company told a reporter from the Beijing News that unlike foreign milk powder manufacturers that directly connect with supermarket channels, the domestic milk powder market is basically driven by channels. "If the price is too low and the channel has no profit, there is no incentive to push you. Products. Now each can of milk powder is priced at least 300 yuan to not lose money, otherwise the profit will be lost if the advertisement is hit."
Liu Senmiao, vice president of Junlebao Group and general manager of the milk powder business unit, believes that when the industry concentration is further increased and only a few major brands are left to compete with each other, milk powder prices will return to rationality.
"At present, the entire milk powder industry is seriously oversupply, and I personally expect the price inflection point to appear in 3 years."
Judging from the current competitive situation, the inflection point of infant milk powder prices seems to have come early.
Zhang Mingjie judged that the infant milk powder market may have two trends in the future. One is that the price war is temporary and will return to normal after the epidemic is over; the second is that the price cannot rise, and the infant formula industry will no longer have high gross profits. "The decisive factor is how long the epidemic lasts. If the epidemic lasts too long, consumers will form a habit of low prices."
Dairy industry expert Song Liang predicts that in terms of retail prices, the proportion of mid-end (200-300 yuan), high-end (above 300 yuan), and low-end (below 200 yuan) products in the infant milk powder market in my country is 60%, 30%, 10%, the proportion may become 70%, 20%, 10% in the future.
With the decline in the birth rate of our country’s population, the infant milk powder market has entered a stage of stock competition, and the homogeneity of products and channels is serious. The price war may continue until next year. "The premise of the change is that the 14 leading domestic and foreign companies can control the goods and prices, and stabilize the prices. Housing prices, but the current judgment is unlikely."
Note: Zhang Mingjie and Wang Xiaogang are aliases in the text.
Beijing News reporter Guo Tie