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Baby food boom in China is emptying Australian supermarket shelves

By Ankush Chibber , 27-Mar-2014

Australia’s baby food industry grew by 9% in value in 2013, thanks mainly to growing demand from China’s expanding middle class for safe and quality milk formula, said a new report.

According to the report from research firm Euromonitor International, growth in Australia’s baby food industry was not even across product segments, and was largely confined to milk formula, which experienced a 12% value increase.

Chinese demand surging

“Most of this was not due to demand from Australian parents, but from parents in China. Concerns about the quality of milk formula are leading to Chinese parents attempting to source their milk formula from elsewhere around the globe,” the report said.

It revealed that the demand was so high that a new grey market trade was flourishing, in which Chinese nationals living in Australia would purchase milk formula in bulk before mailing it to China.

“The result has been a surge in demand for milk formula in Australia over 2012 with the market growing 22% before easing slightly to 12% in 2013. It has also resulted in significant shortages of milk formula at retailers,” it said.

Growing shortages

Researchers at Euromonitor International pointed out that in an attempt to remedy this situation, limits have been introduced as to how many units can be purchased in one transaction, with some retailers only allowing single units to be sold.

“Shortages were particularly severe in 2012 due to the Year Of The Dragon, a year in which it is considered good luck to be born. This led to a further spike in births in China, consequently putting more strain on milk formula supplies in Australia,” it said.

“Growth has been particularly strong in toddler milk formula and again this is largely due to demand from China, where children consume baby milk formula until an older age.”

However, the report warned that following on from the strong growth witnessed since 2007, baby food in Australia is about to enter a period of far less vibrant growth.

“The rise of the birth rate that occurred since 2007 is set to subside, the boom produced by Chinese nationals mailing baby formula back home about to disappear, whilst social trends are moving away from manufactured baby food,” it said.

“A constant value CAGR of only 3% is expected over the forecast period; a stark contrast compared to the 9% constant value CAGR of 2008-2013.”

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