New market potential: Huge growth opportunities for infant formula in China’s lower tier cities

By Guan Yu Lim contact

- Last updated on GMT

Overall sales of infant formula in China grew 86% year-on-year in February 2020 ©Getty Images
Overall sales of infant formula in China grew 86% year-on-year in February 2020 ©Getty Images

Related tags: China, JD.com, Nielsen, Infant formula, livestreaming

A combination of a focus on lower-tier markets and innovative marketing strategies can substantially grow sales of maternal and infant nutrition products, according to Chinese e-commerce giant JD.com.

JD highlighted its thinking during its annual strategy conference, where market research firm Nielsen presented the latest trends in the category.

It said the growth of online channels was outpacing that of offline channels. From 2018 to 2019, the penetration rate of online channels rose 12%, followed by supermarkets and department stores which grew 5% and 4% respectively.

In addition, Nielsen reported that from January to December 2019, sales of baby formula grew 20.7% on online channels.

JD was China’s largest retailer for maternal and infant products in 2019, counting international brands such as Wyeth, Mead Johnson, Abbott, Danone, Unicharm and Kao as partners on its platform. Products sold include infant formula, baby diapers and breast pumps.

Lower-tier cities

According to Nielsen, the growth of infant formula and baby food sales in lower-tier cities is expected to be higher than that of first and second tier cities. It attributed this to population growth in those cities and rises in household incomes leading to higher consumer spending.

JD announced it would develop more diverse products to attract and suit the different needs of customers in these lower-tier markets.

Digital citizens

Most of JD’s customers were born post-1990, and this demographic accounts for 70% of total sales in the maternal and infant category.

Nielsen reported that JD was ranked first in terms of e-commerce penetration rate. Among all the consumers who used mobile apps to buy maternal and infant products in 2019, 51% used its app.

JD added: “Post-90s parents prefer trendy products and are less price sensitive. In addition, they also prefer to watch livestreams and short videos​.”

In the first quarter of this year, viewing time for livestream and short videos on its platform increased by 135% in the maternal and infant category.

This drove sales up by 417% year-on-year, which JD said it “would not be possible to achieve without the contribution of post-90s customers​.”

COVID-19 impact

The COVID-19 pandemic may have also led to the increased viewing time, as majority of citizens were confined at home. Nielsen also reported that 89% of respondents chose to do online grocery shopping during this time.

Jiang Longwu, general manager of maternal and baby products at JD said it gained 110% y-o-y new customers for the category during the pandemic.

During COVID-19, JD’s logistics and supply chain capabilities have made it a trusted platform for Chinese parents. As demand for baby products during the pandemic is high, JD use its resources to ensure continuous delivery, and cooperates closely with brand partners to ensure supply. These helped ensure the stability of commodity prices​,” the firm said.

Nielsen said the health awareness of the population would continue to rise during and beyond the pandemic, citing overall vitamin sales in China which grew 94% year-on-year in February 2020.

Infant formula as a category grew 86% year-on-year in February 2020, while baby food grew 98%.

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