On December
14, Abbott Laboratories, an American-based healthcare and medical device
company, announced a plan to phase out its operation and sale of infant and
children's nutrition products in the market of Mainland China. The product
brands that may be affected by this change include Eleva, Similac, Similac Pro
Care, Similac Advance and PediaSure.
Abbott is a
well-known American brand in the infant formula milk powder industry in China.
According to Abbott, the company has faced fierce competition in the
fast-changing Chinese market during the past few years, and the demand of
Chinese customers for infant and children's nutrition products is changing. As
a result, Abbott has decided to put more effort toward the growing medical nutrition
business and phase out its operation and sale of infant and children's
nutrition products in China. The company will take a year to exit the Chinese
market.
Currently, customers in China can still
purchase Abbott’s infant milk powder through online and offline channels.
Abbott says that it will ensure a smooth business transition, and the
cross-border e-commerce platform will not be affected and will continue to
operate.
Abbott to focus on medical
products in China rather than milk powder
A
representative of Abbott stated that adults in China are becoming increasingly
aware of scientific nutritional supplements, and thus the company will continue
to focus on providing original medical nutritional products. In addition,
Abbott’s other business efforts in China, including diagnostics, medical
devices, and pharmaceuticals, will not be affected.
In February,
2022, Abbott globally recalled multiple batches of infant formula produced at
its plant in Sturgis, Michigan, due to bacterial contamination risks. At the
time of recall, the General Administration of Customs of China also issued an
early warning to urge Chinese customers not to purchase certain infant formulas
produced by Abbott Laboratories of the United States, and they also urged
consumers to stop using these products immediately. Additionally, in 2021,
Abbott was fined more than RMB 9 million (USD 1.3 million) by the Shanghai
Municipal Supervision Bureau after officials discovered that its infant milk
powder contained vanillin, an additive which is subject to strict sale
regulations in China.
Abbott still
growing despite sluggish performance in China
According to
Abbott's previous financial report, if the impact of exchange rate factors is
excluded, Abbott's total sales of infant nutrition products increased by 3.3%
in 2021, and the growth rate in 2020 was 0.3%. The company’s growth benefited from the
growth of the three of its major brands in the United States and multiple
international markets, but some of its growth was offset by its decline in the
Chinese market. According to a financial report for the second quarter of 2022,
the revenue from the company’s nutrition product sales in China was USD 1.9
billion, a decrease of 7.4% YoY.
In fact,
Abbott’s sale of nutrition products accounts for a small proportion of its
entire business. According to the same financial report for the second quarter
of 2022, the revenues from diagnostics, medical instruments, and
pharmaceuticals were USD 4.3 billion, 3.8 billion and 1.2 billion,
respectively.
Although Abbott's business in the Chinese mainland
market has been declining during the past two years, the company has amassed a
reputation and large market share. According to data from Euromonitor, Abbott's
market share in China's infant formula milk powder market still ranked among
the top 10 in 2020.
For more information, please check CCM Dairy Products Newsletter.
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