The rise in the birth rate will undoubtedly bring “positive benefits” to the milk powder industry, and domestic milk powder brands will benefit even more. According to estimates by experts from the National Health and Family Planning Commission, after the implementation of the “two-child policy for only children”, the annual growth of the domestic infant milk powder market will be about 10% to 20%, and the annual expansion of the domestic infant milk powder market will be about 3.85 billion to 7.7 billion yuan.
On November 18, 2014, dairy stocks such as Sanyuan Foods and Western Animal Husbandry all hit their daily (limit-up), while Beingmate, Yili Group, and Bright Dairy also rose. On the 19th, the gains of these stocks in this wave declined somewhat. The finalization of the “single-child second-child” policy injected new “positive energy” into the dairy products industry. The industry generally predicts that within five years starting from 2015, the market capacity of China’s milk powder industry will increase by 10% to 20% annually, and the milk powder market is expected to expand by 7 billion yuan each year.
The annual increase in newborns is 9% to 19%
On November 15th, the “Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reform” adopted at the Third Plenary Session of the 18th Central Committee was released. It proposed to launch and implement the policy that couples where one party is an only child can have two children, and gradually adjust and improve the birth policy.
Wang Peian, Vice Minister of the National Health and Family Planning Commission, stated that there will be no unified national timetable for the launch and implementation of the policy allowing couples where one spouse is an only child to have a second child. Each province (autonomous region, municipality directly under the Central Government) will determine the specific time based on its actual situation. However, the time intervals between the launch and implementation in various regions should not be too long.
Yuan Xin, a professor at the Institute of Population Development and Research of Nankai University, stated that Guangdong Province may take the lead in implementing it. Lu Jiehua, a professor at the Department of Sociology of Peking University, believes that it will be launched as early as the end of this year, and 1/3 of the provinces will implement it in 2014.
According to estimates by experts from the National Health and Family Planning Commission, after the implementation of the “single-child second-child” policy, the number of new births in China in the next few years will rise to the level around 2000, that is, 17.8 million to 19.5 million infants will be born each year. This is an increase of about 9% to 19% compared with the 16.35 million in 2012, which means that the sales volume of the infant milk powder industry will expand by more than 10%. If we take into account the increase in the proportion of milk powder feeding and the natural growth of milk powder prices, the overall revenue growth rate of the industry may exceed 20% in the next few years.
The total sales volume of milk powder will reach 60 billion yuan this year.
The rise in the birth rate will undoubtedly bring “positive benefits” to the milk powder industry, and domestic milk powder brands will benefit even more. Wang Dingmian, a well-known dairy industry expert, stated that the country’s relaxation of the two-child policy will drive the dairy industry, with the market capacity increasing by 20% to 30%. Last year, the total sales volume of the domestic milk powder market was approximately 55 billion yuan, and the policy’s driving effect on the dairy industry will be evident in the next two years. Mr. Yue, the owner of a baby products store, said that this policy will boost the baby products industry, but he has no plan to increase the purchase volume for the time being and will decide based on market demand at that time.
According to AC Nielsen’s November report, from January to November, the total turnover of the national milk powder industry increased by 9% compared with the same period last year, while the sales volume remained the same as last year. A senior person in the milk powder industry told reporters that the sales volume is estimated to reach about 60 billion yuan this year (excluding smuggling), with a 10% growth in recent years. “However, the market growth after the relaxation of the two-child policy will not be seen until one or two years later.”
Hongyuan Securities analysis states that after the relaxation of the “single-child second child” policy, it is expected that families who have already had their first child within the previous ten years (2005 – 2014) are expected to have a second child in the next five years (2015 – 2019). It is projected that there will be an annual increase of 1.9 million infants from single-child second-child families in the next five years, which is a 12% increase from the current level. Based on the existing scale of the milk powder industry, the market capacity is expected to increase by approximately 7 billion yuan.
