Baby Food: Unveiling Global Growth Drivers and Premiumisation Strategies

Euromonitor International’s latest global briefing on baby food “Baby Food: Unveiling Global Growth Drivers and Premiumisation Strategies“, discusses growth and innovation trends in milk formula globally, and also evaluates opportunities and challenges in the world’s largest market, China, notably in the wake of the recently implemented legislation limiting the number of brands and products available.

Premiumisation strategies are likely to remain driven by free-from special baby milk formula including hypo-allergenic milk formula, naturally healthy products such as organic, as well as goat milk formula. The emergence of HMOs in milk formula is also likely to fuel new product launches. Goat milk formula a growing niche in Asia Pacific and Australasia Goat milk formula brands are seeing strong expansion in selected developed markets, notably Australia and New Zealand, as well as in emerging markets in Asia Pacific, benefiting from a premium and healthy image among parents. As it contains less protein than cow’s milk, it reduces the risk of obesity and is marketed as being easier to digest than cow’s milk due to the properties of its fatty acids.

In Australia, recent product launches and wider distribution of emerging brands such as Oli6 contributed to recent growth, while the Bubs brand has made inroads with organic milk formula. In addition to the emergence of niche players, Danone recorded a stellar performance under the Karicare Goat brand in New Zealand, and to a lesser extent in Australia. Goat milk formula sales in Australia and New Zealand were also boosted by demand from Chinese consumers through the grey import channels. The Australian brand Bubs gained from being offered on China’s Tmall internet retailing platform in October 2017, with Bubs’ CEO estimating that goat milk formula accounted for around 5% of total milk formula sales in China in 2017. However, future growth in China is uncertain, as the brands’ continued presence is conditioned upon winning approval from the CFDA (China Food and Drug Administration).

In Taiwan, the New Zealand Goat Milk Co-operative has recorded strong growth under its Karihome brand, its share of milk formula exceeding 5% since 2015. The brand is marketed as not containing A1 beta casein and therefore competing directly against A2 milk.

HMOs present a new breakthrough in improving milk formula’s health properties. The recent development of milk formula containing human milk oligosaccharides (HMOs) is set to become a major axis of premiumisation strategies for manufacturers in their attempt to replicate some of the health properties of human milk. Among the estimated 200 prebiotic HMOs present in human milk which contribute to building the immune system in infants and to improving their digestion, the two most abundant types, 2’fucosyllactose (2’FL) and lacto-n-neotetraose (LNnT) are estimated to account for over 35% of all HMOs. Therefore they are some of the first ingredients synthesised by manufacturers and have been approved for commercialisation by food administrations in the EU and the US.

Abbott launched Similac Pro-Advance in 2016 in the US containing one of these HMOs, 2’FL, while Nestlé Nan Optipro Supreme, launched in Spain in summer 2017, marked a further development as it contains these two HMOs, 2’FL and LNnT. Nestlé also launched the first milk formula containing 2’FL in Asia under the illuma brand, with a new variant introduced in Hong Kong in November 2017, and other players planning to introduce new products containing HMOs include FrieslandCampina, which announced a launch by the end of 2018.

The health benefits of HMOs could encourage a greater number of mothers and health professionals who normally favour breastfeeding to see these products as a suitable alternative for occasional use. However, due to the high production costs of synthetic HMOs, milk formula brands containing these ingredients will retain a distinct premium positioning, and future legislation could limit the types of HMOs which will be allowed in milk formula.