Foreign firms boosted by China’s new law on baby formula

International firms are likely to gain a bigger share of China’s baby formula market due to a new law governing product registration, analysts say.

The recently issued food safety law limits manufacturers to three infant formula brands each and requires all brands to be registered with the China Food and Drug Administration before they can be sold to retailers.

The law, expected to take effect soon, will apply to 103 Chinese companies and 73 foreign ones with production licences in mainland China. It will prevent companies from packaging the same formula under many different brands.

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“This will trigger a reshuffle in the market,” said Lei Yongjun, chairman of Beijing-based consulting firm Proper Tao Ltd.

“We estimate as many as 80 per cent of the thousands of baby formula brands currently sold on the mainland would be eliminated upon the enforcement of the law.

“Most of them would be from those manufacturers adopting multi-brand strategies. On the other hand, big international formula manufacturers, which usually operate no more than three brands in China, will have a chance to take the market share lost from local rivals.”

China has been keen to reform its infant formula market, the largest in the world, in recent years.