The latest financial report for 2023 is released, and the performance of foreign-funded infant milk powder brands represented by Nestle, Danone, FrieslandCampina, and A2 in China has grown against the trend. Some companies attribute this to tight inventory and pricing levels by local teams, continued focus on ultra-premium items and growth, and companies looking for incremental business in the downline market.
According to channel sources, foreign milk powder brands have achieved remarkable results in controlling goods and stabilizing prices since the second half of 2022, and at the same time, sinking channels to provide localized fine services, giving channels relatively higher profit margins and helping their performance continue to grow.
For the future industry trend, the industry believes that the domestic infant milk powder market has entered the stage of stock competition, with the top ten powder brands accounting for more than 85% of the market share, and the top five brands accounting for more than 70%. The era of excess profits of milk powder has ended, and both domestic and foreign brands have to find new tracks.
The performance continues to grow.
In the past year, the performance of several major foreign-funded milk powders in China has generally shown a leading trend.
According to the latest financial report, Nestle's sales in Greater China in 2023 will be equivalent to 43.6 billion yuan, a year-on-year decline. However, thanks to the "Nengen" hypoallergenic formula and special nutrition solutions, its infant nutrition business will achieve positive growth in 2023.
In 2023, Danone's sales revenue in China, North Asia and Oceania will be 349.6 billion euros, up 101%。Among them, the sales revenue in the fourth quarter of 2023 was 82.2 billion euros, up 7.2 billion euros year-on-year4%, infant nutrition and medical nutrition in the Chinese market have maintained growth momentum.
Juergen Esser, Chief Financial Officer of Danone, said at the earnings briefing that Danone Infant Nutrition continued to grow solidly in the fourth quarter of 2023 and continued to expand its market share, thanks to the strict control of inventory and pricing levels by the local team. Danone has already registered the formula of milk powder products in the Chinese market, and at the same time seized the opportunities in the sinking channels, especially in the third and fourth tier markets. As the market continues to consolidate and some brands withdraw, Danone's new national standard registered products will have new market opportunities.
FrieslandCampina China and A2 Dairy New Zealand also saw growth. In 2023, FrieslandCampina's Professional Nutrition business revenue was 115.5 billion euros, up 89%, mainly due to the performance of "Royal Meso" milk powder in the ultra-high-end category in the Chinese market, FrieslandCampina's China business also achieved double-digit growth for four consecutive years.
Chen Ge, President of FrieslandCampina China, pointed out that FrieslandCampina China has created a streamlined channel model, developed a team with combat effectiveness, and enhanced organizational vitality by focusing on three important things: talent and culture, process and visibility. "This is the underlying logic behind FrieslandCampina China's double-digit growth for four consecutive years. ”
In the first half of fiscal year 2024 (ending December 31, 2023), A2 Dairy Company's infant formula revenue increased by 15%。Among them, the revenue of Chinese label infant milk powder increased by 104% to 2NZ$9.9 billion; The overall revenue of English label products decreased by 69%, but up 19 percent in China and other Asian regions9% to 2NZ$10.5 billion.
During the reporting period, A2 milk powder also entered the top five in China's infant formula milk powder market, and launched a new national standard Chinese label milk powder, and the listing progress was faster than planned. During the transition period between the old and new national standard products, the channel inventory and product freshness have reached the target level. The sales of A2 English label milk powder will stabilize from the first half of 2023, and new products will be launched one after another.
Three-year strategic adjustment.
In the context of the decrease in the number of newborns, intensified competition, and slowing industry growth, the performance of several major foreign-funded milk powder brands has attracted the attention of the industry.
Since 2022, domestic infant milk powder listed companies have ended their high performance growth, and channel consolidation and inventory clearance have become key words in the industry. Some listed dairy companies admitted frankly at the performance briefing that the baby powder industry will experience a double-digit decline in the first half of 2023, and there will be no signs of improvement until the fourth quarter, mainly due to the fact that the inventory clearance of small brands is nearing the end after the implementation of secondary formula registration.
Foreign milk powder brands represented by Nestle, Wyeth, Mead Johnson, FrieslandCampina, Danone, and A2 experienced a decline or fluctuation in their performance in China as early as 2019 and 2021. Affected by this, Reckitt Benckiser, FrieslandCampina and A2 Dairy Company have all conducted a strategic review of their infant milk powder business in China.
Since 2020, Danone has successively acquired Qingdao Maigao, Hunan Obijia and Dumex China. In September 2021, Mead Johnson China changed its ownership from a business unit of Reckitt Benckiser Infant Nutrition in Greater China to an independent company localized in China. In October 2021, Nestlé announced the establishment of a separate Greater China region to strengthen the company's market-led management model. A2 Dairy announced a further balance of inventories in the fourth quarter of FY2021. In order to build a more agile organization, FrieslandCampina announced in June 2022 that it would focus on the high-end infant milk powder brand "Meisojiaer" and launch a new lease on Yili**'s Xiushui infant milk powder factory in Shenyang, Liaoning Province.
After a series of strategic reviews, channel sinking, mergers and acquisitions, and accelerated localization, several major foreign milk powder brands have ushered in recovery growth in the Chinese market since 2022 and will continue the momentum into 2023.
The era of excess profits is over.
Tang Li, founder of the "Daddy Love" maternal and infant chain, believes that foreign-funded milk powder has been losing ground in the domestic offline market in the past, and the main problem is that the problem of goods channeling and indiscriminate prices has hurt the channel, unlike domestic brands that have long-term and stable market planning and channel support policies. "From the second half of 2022, we can clearly feel that foreign brands are sinking into the market, focusing on dynamic sales, and doing joint marketing with key channels. Foreign brands such as Danone, Meso, Mead Johnson, and A2 have begun to localize their transformation, and local sales staff will serve the local market. ”
However, some domestic milk powder brands have embarked on the old road of foreign-funded milk powder in the past. According to Tang Li's observation, the main problem of some large-scale products is that the price is unstable, and some brands are fleeing and pressuring goods, which damages the confidence of the channel. These brands have high channel coverage, dense sales points, and the same brand has launched a number of subdivided products, and there is little difference between different series of products, which in turn causes internal friction among enterprises, and fierce battles between brands and channels. At present, the domestic milk powder with infants and young children has dropped by about 100 yuan, such as the original price of 450 yuan of ultra-high-end milk powder, which is now only more than 300 yuan after the purchase of gifts. Taking a domestic milk powder brand and a foreign milk powder brand as an example, the former sells a can of milk powder and makes a profit of less than 10 yuan, while the latter can make a profit of 20 yuan to 30 yuan, which also makes more channel providers turn to imported brands.
In the past two years, all brands that adhere to large single products and control goods and stabilize prices have achieved performance growth and gradually become new large-scale circulation products. The fundamental lies in adhering to offline control, channel control, and price stabilization, protecting the interests of channels, and at the same time opening up online and offline with the help of private domains, and strengthening the online interaction between brands and consumers with the help of professional maternal and infant platforms. The stability of the price order, on the one hand, maintains a good cooperative relationship with channel providers, and on the other hand, establishes a good brand image in front of consumers. How can a brand that changes frequently and has many sub-brands make consumers firmly recognize its image? Song Liang, an expert in the dairy industry, suggested that in 2024, leading enterprises should reduce the amount of investment, with the goal of increasing profits, maintaining their own price plates, and safeguarding the interests of channels.
For the future development, Song Liang believes that the era of excess profits of infant milk powder has ended, and both domestic and foreign brands must find new tracks. Tang Li also believes that at present, the infant milk powder market is in the stage of stock competition, and there is a certain space for expansion of foreign milk powder brands in the sinking market, but it is relatively limited, and the way out for milk powder companies is still looking for new tracks.
At present, there are foreign milk powder brands that are making efforts in new categories. In the fourth quarter of 2023, Nestlé Greater China launched "Qifu" children's growth milk powder with added breast milk oligosaccharides. Sales of mature nutrition products also grew at a double-digit rate, mainly due to the introduction of N3 broodstock milk.
D**id Bortolussi, General Manager and CEO of A2 Dairy Limited, also stressed that it will continue to invest in the Chinese market, and the company is also investing in nutritional products for children and the elderly, seeking to grow in new markets.
Beijing News chief reporter Guo Tie.
Edited by Zhu Fenglan.
Proofread by Wang Xin.