Drafted by China’s Food and Drug Administration (CFDA), the new regulations for registration, manufacturing and sale of infant formula products have been released for public comment.
The maximum number of infant formula brands for each manufacturer to register will be cut from five to three with only three formulations for each brand.
The draft requires that infant formula manufacturers must not manufacture or sell their products, whose trademarks, names and addresses of the manufacturers are only registered overseas, in China.
An official at the CFDA claimed the regulator planned to conduct more spot checks on the 176 infant formula manufacturers in Chinese markets, including 103 domestic producers and 73 foreign firms.
Calling the market “disorderly”, the official said the regulations were designed to trigger industry consolidation and bolster Chinese formula makers, in an attempt to improve efficiency and enhance product quality.
The draft regulations stressed that the application for registration must be submitted by manufacturers other than distributors and agents, and this policy applies to both Chinese and overseas producers.
“If they went into effect, about 80% of more than 4000 existing formula brands could be wiped out from the market,” Dingmian Wang, a high-profile dairy industry expert in south China’s Guangdong province, said.
In addition, the infant formula industry in China faces a severe overcapacity problem, leading to significant decline in profitability of infant formula manufacturers in recent years.
“The overcapacity is likely to spark a price fall given the annual sale in domestic market is approximately 700,000 tonnes but the overall capacity will still likely be more than 2 million tonnes when implementing the new regulations,” Miaosen Liu, general manager of Hebei-based Junlebao Dairy Co, said.
“Given the current inventory level, the industry’s capacity could be reduced by 50% in the next year, making room for the growth of surviving formula producers,” Haobo Ma, an analyst with Suzhou-based Soochow Securities, said.
According to Euromonitor, China’s infant formula market is expected to grow by more than 60% to US$30 billion in 2017, from US$18 billion today.
