China's baby formula industry, which is more or less in a state of chaos, will likely undergo significant changes in the near future. Earlier this month, China Food and Drug Administration (CFDA) released a draft law for baby formula products manufactured in China. The new law should help "rectify" many of the industry's problems, although there are details that warrant further discussion, experts told the Global Times.
At the RT-Mart supermarket on Chunshen Road in Shanghai on Monday, a 61-year-old woman stood staring at the baby formula aisle, trying to choose one of hundreds of products from more than a dozen of brands.
The myriad of choices had overwhelmed her.
"All the products are beautifully packaged and claim to have an excellent formula," said Han Jinbao, who was buying the formula for her 11-month-old grandson. "I don't know what makes one different from another."
Typically, each brand of baby formula has several product lines, and each line has three to four products for different age groups.
"I am completely confused," she told the Global Times on Monday. "They all sound the same."
If the Chinese government gets its way, Han won't have this problem for much longer.
On September 2, China Food and Drug Administration (CFDA) posted a draft law on its website for the registration and management of domestically manufactured baby formula. It is seeking public comment on the draft until October 1.
The draft law restricts the number of baby formula products that manufacturers can sell and creates strict rules about what they can claim on product packaging.
Market consolidation
Under the draft law, all baby formula manufacturers in China must register their formula products with the CFDA.
Each manufacturer can apply to register up to 15 products under five product lines, though different formula products for each age group must have "significant differences" in their ingredients.
"The law, once it goes into effect, will help to rectify China's baby formula industry, which is more or less in a state of chaos nowadays," said Song Liang, a dairy industry commentator.
Song said China's baby formula market is "far too crowded."
"In the U.S., there are about a dozen baby formula brands. In China, there are 2,000," Song told the Global Times on Monday.
"In China, many baby formula companies want to maximize the number of brands they have on the market," Song noted. "Some companies have more than 50 brands."
According to Song, China's market is huge, with many distribution channels. Many companies are trying to maximize their profits though a "fine distribution" strategy to make use of all those channels.
For example, a company creates an expensive "flagship" baby formula product that it only sells through certain vendors, such as specialty stores.
Under this strategy, many companies have tried to launch as many products as possible.
However, those products often contain nearly the same ingredients. At RT-Mart, there were two products for 6-month-old infants under the domestic baby formula brand -Pro-kido, which belongs to Inner Mongolia Yili Industrial Group Co.
One of the products contained only three more ingredients than the other, yet costs 80 yuan ($12.60) more.
However, many companies will be forced to reduce their numbers of baby formula brands and product lines once the new law takes effect.
"I assume it's a good thing," Song said.
"It should force companies to shift their time and money from brand marketing to product research," Song noted. "Because in the future, the only way for a baby formula company to stand out is to provide distinctive, high-quality products."
