Milk formula manufacturers face entrenched challenges due to unfavourable sociodemographic conditions. With reduced volume sales growth opportunities, premiumisation strategies driven by greater focus on innovation and segmentation will be increasingly necessary to sustain value sales. Special milk formula is increasingly seen as a key growth driver, while premium niches such as A2 milk formula and goat milk formula see a growing presence of global players, alongside organic milk formula.
Volume sales growth is expected to remain undermined by the long-term decline of birth rates in major emerging markets and the growing awareness of the health benefits of breastfeeding promoted by health authorities, which particularly hits standard milk formula. However, a rise in urbanisation in some emerging markets also gives manufacturers a potentially wider customer base. In developed markets, a greater prevalence of working from home and lower employment rates as a result of the COVID-19 crisis are also likely to contribute to undermine volume sales growth.
The erosion of global volume sales growth in milk formula forces manufacturers to rely ever more strongly on premiumisation through innovations and segmentation strategies to build a competitive advantage and support value sales and profits. Despite economic pressure linked to the COVID-19 crisis dampening growth, demand for premium milk formula is expected to remain resilient, especially in Asia Pacific.
Growing-up milk formula remains the main growth-driving category in milk formula globally, followed by special milk formula, which is driven by HA (hypoallergenic) milk formula, increasingly playing a key role in the growth strategy of major manufacturers, fuelled by a rising awareness about allergies and food intolerance among parents.
The growing niche of A2 milk formula offering recipes containing no A1 beta-casein protein targets parents of lactose intolerant babies and is set to be further boosted by recent launches by major global baby food manufacturers. Goat and sheep milk formulas also benefit from the rising number of parents seeking alternatives to cow’s milk and also see a growing presence of major global players.
Organic milk formula benefits from strong consumer trust, notably in Asia Pacific, while in North America and Western Europe, its popularity is further driven by rising consumer concerns around environment and animal welfare.
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