The declining number of newborns continues to be the Sword of Damocles hanging over the infant formula industry. Following a brief recovery driven by the 'Dragon Year baby boom,' the infant formula market in 2025 has entered a period of unusual 'calm.' Market recovery and the gradual restoration of order have allowed the industry to catch its breath amid a deep structural adjustment. However, expectations of a renewed decline in the birth rate this year, coupled with the fading of the奶粉红利 (milk powder dividend) in the second half, have prompted the industry to quietly prepare for a new round of competition. Whether it's dairy companies discreetly adjusting their product portfolios or the accelerated consolidation of sales channels, undercurrents are swirling beneath this apparent tranquility.

The industry has 'caught its breath' this year. At 9:30 a.m., Wang Hao, the founder of a small maternal and child product retail chain in Weihai, Shandong, opened his store on schedule. Weihai in winter is also the off-season for tourism, making the city seem much quieter. Only a few customers entered the store throughout the entire morning, but he has grown accustomed to this. "We sell when people come, and we rest when they don't," Wang Hao stated. Wang Hao has been in the maternal and child industry for sixteen years, having experienced the cliff-like drop in business during the pandemic and the fierce price wars in the奶粉 market afterward. Currently, the scale of his store's business has declined by nearly 50% compared to pre-pandemic levels. Fortunately, the rebound in the birth rate during the Dragon Year has helped normalize奶粉 market prices and order, making Wang Hao feel that the market has regained some vitality this year, giving a sense of having 'caught one's breath.' However, in Wang Hao's view, this sense of calm does not stem from an industry-wide recovery but rather seems to stem from the gradual establishment of a 'new normal.' Since the beginning of this year, there has been a noticeable improvement in破价促销 (price-breaking promotions) and cross-regional arbitrage in the奶粉 market. Store奶粉 sales have finally halted their decline, and store profits have also rebounded somewhat. Companies have adapted to the new market trends, and sales representatives from distributors seem less anxious, no longer constantly visiting the store but instead adopting an approach of 'if the product doesn't sell, keep it on display; settle payments at the end of the month for what has sold.' In recent years, consecutive declines in the birth rate led to a shrinking total market size. To compete for the remaining market share, the奶粉 industry erupted into intense price wars, rapidly deteriorating market order. However, with the birth rate rebounding to 9.54 million in 2024, an increase of 520,000 compared to the previous year, the industry has experienced a recovery. He Kanghui, the national operator for Bright Dairy's Zhiyou brand, revealed that competition in the奶粉 market in 2025 has not slowed down. The trend toward consolidation in the overall market structure is becoming increasingly apparent, but the market has become more orderly. An increasing number of brands are proactively controlling inventory, and the overall situation is beginning to normalize. Nie Wenjing, General Manager of Huaguan Infant Formula, also noted that thanks to improved order and pricing performance, the company's sales in 2025 are indeed somewhat better than the same period last year. A responsible person from a dairy company mentioned that the recovery of the奶粉 market in 2025 is also related to the widespread adoption of stricter channel control measures by companies. For instance, an increasing number of enterprises are using methods like can-inside codes and electronic geofencing to manage inventory. It is understood that in the past, dairy companies provided certain sales expense support to channels to help them expand the market, but these were mostly calculated based on purchase volume or sales volume. This created opportunities for channels to exploit these funds and often led to market price chaos. Now, companies are using technological means to stipulate that consumers within a designated region receive cash or point rewards after opening the can and scanning the code, and only then can the distributor receive the corresponding incentive. Directly allocating expenses to consumers improves precision and, to some extent, eliminates cross-regional arbitrage. Although the opportunity for套利 (arbitrage) is gone, which may dampen distributor enthusiasm somewhat, market order is improving. Looking at the situation in the first three quarters of this year, the performance of major奶粉 companies and listed maternal and child retail chains has rebounded to varying degrees. For example, recent Q3 data released by H&H International Holding (01112.HK) showed that its Infant Nutrition and Care products business grew 24% year-on-year in the first three quarters, with infant formula奶粉 sales increasing by 33.3%.

The fading Dragon Year红利 (dividend) stirs undercurrents in the market. From visits and interviews, it is understood that the industry is most concerned about the 2025 birth rate situation. Feedback from the market end indicates that the奶粉 industry was still experiencing rapid recovery in the first half of this year, but showed signs of weakness again in the second half. Song Liang, an independent dairy analyst, pointed out that in the second half of the year, the impact of the Dragon Year生育红利 (birth dividend) is waning. Sales of Stage 1 infant formula declined in August and September, and the sustainability of the industry's recovery remains to be seen. According to data from maternal and child service provider Hui Yuan Bang, the average single-store奶粉 sales value in maternal and child stores increased by 3.2% year-on-year in the first three quarters, and the average奶粉 transaction price also rose by 1.3%. However, starting in August, the average monthly奶粉 sales per store began to fall below the levels of the same period in 2024. The latest NielsenIQ data also shows that the全渠道 (all-channel) sales value for infant formula from January to November this year was 108.2 billion yuan, flat compared to the same period last year. Offline channel sales decreased by 4.4% year-on-year, while e-commerce sales grew by 10.1%. Notably, the all-channel sales data from January to August had shown a 1.6% year-on-year increase. In terms of product structure, Stage 1 formula sales grew 3.3% year-on-year from January to November, Stage 2 grew 11.9%, while Stage 3 formula sales decreased by 6.5%. Multiple interviewed奶粉 company representatives believe that although the relevant national authorities have not yet announced the 2025 birth figure, a chill is already being felt from the market end, and internal adjustments are being made within companies. It has been observed that beneath the surface calm of this year's market, various奶粉 brands are accelerating配方 (formula) updates to prepare for the next phase of competition. According to incomplete statistics, over 40奶粉 brands have completed name changes this year. Furthermore, several brands including Feihe, Yili, Junlebao, Yipin, and Kabrita have launched new products or undergone配方 upgrades. The intensity of these配方 updates is greater than before, with a stronger focus on functionality. For instance, the two new products launched by China Feihe in December are both functional新品 (new products), focusing more on brain development. Simultaneously, the new goat milk formula announced by Yipin Dairy uses dual HMO, dual OPO, and dual probiotic formulations, targeting the hypoallergenic segment. Song Liang explained that with the recovery in market order this year, some small and medium-sized brands are also seeing a revival. Starting in the second half of the year, the under-the-surface competition among enterprises has intensified. Driven by concerns about another potential decline in the total market size,奶粉 companies are accelerating the technology race, attempting to differentiate themselves from competitors through配方. It is foreseeable that market competition in 2026 will be even more intense. It is noteworthy that as the奶粉 industry undergoes deep adjustment, the maternal and child product sales channel is also entering a period of rapid consolidation. This year, on one hand, leading chain brands like Kidswant, Aiyingshi, and Xiaofeixiang have plans for further national expansion. On the other hand, regional alliances like Yinglianhui and Youkangbaobei are also incorporating small and medium-sized chains to expand their store networks, further increasing market concentration. Luo Nengcai, Chairman of Dengkang Beibi, mentioned at a previous industry event that channel integration in the maternal and child sector is the general direction, aimed at enhancing supply chain, member services, and operational efficiency to better participate in market competition. It is understood that through integration, alliances gain more stores, which often gives them greater bargaining power when negotiating with brands of奶粉 and maternal and child products. This includes争取 (striving for) channel-specific定制产品 (customized products) to secure more profit. Beneath the apparent calm of母婴渠道 (maternal and child channel) integration, undercurrents are similarly swirling. "The channels are undergoing rapid reshuffling," noted Nie Wenjing, who frequently works in the front-line market, feeling that the trend of 'big fish eating small fish' in the母婴渠道 this year is very obvious. There is also a博弈 (game) between channels and brands, as brand investments are mainly concentrated in their direct-sale products, while channels prefer定制产品. In the view of Cao Tianwei, General Manager of Zhongying Shangqing, on one hand, the various post-integration alliances are competing for定制产品 from major brands, using the profits from these products to attract more stores to accept integration. On the other hand, there is also a博弈 between brand owners and the alliances. The more定制奶粉 (customized milk powder) is produced, the more brand owners sacrifice gross margin, and it can also encroach on the space available for their direct-sale products.