Baby Food: Unveiling Global Growth Drivers and Premiumisation Strategies

April 2018

Growing-up milk formula continues to generate the majority of growth in milk formula, as it is less vulnerable to awareness of breastfeeding’s benefits. China is forecast to remain the world’s largest market in terms of its value contribution to growth, although manufacturers face new challenges linked to legislation limiting the number of products available. Premiumisation strategies are likely to remain driven by free-from special milk formula and naturally healthy ingredients such as organic.

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Growing-up milk formula offers strongest growth opportunities

Growing-up milk formula is expected to continue generating the majority of actual sales growth in milk formula, as it is less vulnerable to the promotion of breastfeeding, and may benefit from premiumisation based on health attributes. While growing-up milk formula is highly developed in Asian emerging markets including Indonesia, Thailand and Vietnam, expected to remain key growth drivers, it remains underdeveloped in some developed markets, notably Japan, where it may widen its consumer base.

China leads global sales growth but new legislation brings challenges

China is forecast to remain the world’s largest growth-contributing market in baby food, thanks to the adoption of milk formula among urban parents, lower breastfeeding rates than in most emerging markets in Asia, and the strong demand for premium brands. However, the market presents new challenges and uncertainties, notably due to the legislation to limit the number of products which came into force in January 2018.

Socio-demographic factors a core driver of milk formula’s growth

Growing urbanisation and a rise in female participation in the workforce are expected to remain key growth drivers for milk formula in some emerging markets in Asia Pacific, notably in Indonesia and Vietnam, as well as in the Middle East and Africa in Saudi Arabia and South Africa, often fuelling growth across all three main age groups in milk formula: standard, follow-on, and growing-up.

Innovation hinges on organic, clean label, lactose-free

The strong performance of premium products fuels growth globally. Organic represents a key growth area, both in prepared baby food and in milk formula, as it helps manufacturers build brand images centred on natural ingredients. Special baby milk formula such as lactose-free and hypoallergenic variants are boosted by greater awareness of allergies, while liquid milk formula is emerging in Asia Pacific due to the flurry of new product launches, emphasising convenience.


Key findings

Global Overview of the Category

Baby food set to remain a star performer in packaged food
Premium brands help multinational players to strengthen their lead
Asia Pacific leads sales, Middle East and Africa to grow the fastest
Breastfeeding rates increase in major countries but decline in China
Global sales and growth driven by growing-up milk formula
Wider audience helps boost growing-up milk formula in Asia Pacific
New launches and premiumisation boost liquid milk formula in Asia
Middle East and Africa: socio-demographic shifts set to fuel growth

Spotlight on China

China forecast to remain key contributor to global sales growth
Tighter regulations pose a challenge for niche brands…
…while creating opportunities for Chinese-foreign partnerships
Premiumisation and provenance remain key to build consumer trust
Local brands tap into premium and health and wellness demand
Rise in e-commerce and specialist stores benefit milk formula brands

Key Growth Drivers

Rise in female employment to boost sales in key emerging markets
Socio-demographic trends fuel growth in Middle East and Africa
Industry’s innovation hinges on organic, clean label, lactose-free
Developed markets’ bias for organic milk formula, growth in China
HMOs a new frontier in improving milk formulas’ health properties
Special baby milk formula forecast to gain traction in Asia Pacific
Free from lactose: US falls out of favour; China and Mexico rise
Goats’ milk formula: Australasia and Asia lead, Europe follows suit

future opportunities and challenges

Vast unmet potential in least mature markets in Asia Pacific

Future Opportunities and Challenges

Future demand drivers: product price and GDP growth
Key challenges and strategies to capture growth opportunities


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