The China Food and Drug Administration (CFDA) has
revealed stricter regulations for base powder and misleading marketing
strategies for China’s dairy enterprises in December. According to CCM, the
effects are likely to wipe out a decent amount of small and middle-size
companies in the very competitive market.
Source: Pixabay
After some scandals regarding to Chinese infant
product manufacturers, like the big melamine scandal in 2008, the Chinese
government is tightening the supervision of the domestic enterprises in their Implementation of the Regulations on the
Administration of Formula Registration for Infant Formula. The regulations,
revealed in early December, 2016, are dealing with stricter rules for base
powder usage and misleading marketing tactics. The new regulations are very
likely to restructure the fierce market competition and lead to stricter
controls.
Chinese companies can use domestic produced base
powder as well as overseas produced one. But, whether the production is taking
place in a plant, that is related to the dairy enterprise or a completely
independent external producer, the purchasing company has to check and ensure
the quality and safety of the base powder before using it in the production,
according to CCM. Furthermore, the local food and drug administrations have to
do controls in the producing plants, whenever they apply for a new product
license or a license renewal. It is not decided yet, if the check of Chinese
producers also is required for plants in oversea.
The other regulation regards to misleading marketing
activities. It contains especially targeting the labelling of infant products
and the claims that are involved with the labels. Both, Manufacturers or rather
retailers as well as the local administrations are ordered to check any
products and make sure, that the labelling is whether false nor infringing.
The regulations for labelling are supposed to make
sure, that product name, declaration of ingredients, and the function
description are true and not exaggerated or misleading.
According to CCM, the growing pressure on manufacturers
regarding label management will lead customers to preferring big and
established companies with a trustful brand and service. Small and middle-sized
enterprises are likely not to stand their ground and be wiped out from the
market.
What’s more, the new regulations lead many dairy
producers to look for new markets and products. Some products, that have seen
increased production and focus recently are milk formulae for adults, liquid
milk, and organic infant formulae. According to CCM, already several
manufacturers have made efforts in this new markets and try to diversify their
business, avoiding more competition in the stricter regulated infant formula
business.
China’s infant formula market is in a high
competition, since over 100 manufacturers with thousands of product lines have
flooded the market in the last decades. As a result, the market share of the
top manufacturers is much less compared to the market share concentration in
other developed countries. Also, some scandals in recent years have shaken the
trust of consumers to domestic infant formula producers, opening a good market
share for overseas products and brands.
About
CCM:
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China’s agriculture, chemicals, food & ingredients and life science
markets.
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