The approval of HMOs in China makes ingredient suppliers the biggest winners. For foreign infant formula companies that have already been selling HMOs products in the Chinese market, their sales channels can be expand to offline, but they also face stiffer competition from Chinese domestic players.

On October 7, 2023, China National Health Commission (NHC) announced the approval of 2'-fucosyllactose (2'-FL) and Lacto-N-neotetraose (LNnT) as nutrition fortifiers in infant and young children formula food, infant formula food for special medical purposes, and children milk powder.

With these ingredients now approved, several major Chinese companies promptly publicized their new HMOs products, including Firmus, Junlebao, Yili, and Yipin.

The efficient launch of these new HMOs products shows that Chinese companies have been laying the groundwork in this segment for some time. Notably, all these HMOs products are children's milk powders. Because infant formulas in China require recipe registration, which takes time before obtaining approval. Becoming the first company permitted to launch an HMOs infant formula is essential as it confers advantages of cementing consumer's mindshare and demonstrating R&D capabilities. Therefore, enterprises are still preparing the registration.

What Does the Approval Mean for The Stakeholders?

Opportunities and challenges for foreign companies

As HMOs (2'-FL and LNnT) have already been approved in the US, EU, Australia and New Zealand, some HMOs infant formulas from those markets have been exported to China via Cross Border E-commerce, but restricted to online sales. With HMOs now approved in China, these companies can expand the sales channels to offline markets if they obtain recipe registration for these infant formula products. This can facilitate market growth.

However, as Chinese domestic manufacturers can now produce and sell HMOs products, foreign companies will face stiffer competition in this segment.

Big opportunity for Chinese infant formula companies

Under stringent supervision, permitted ingredients for infant formula in China are limited, leading to increasing product similarity. Approving new ingredients like HMOs can stimulate the market, enabling companies to develop more novel and competitive offerings.

Additionally, the previous lack of HMOs approval in China constrained domestic infant formula growth in this niche segment. With HMOs now approved, Chinese companies can better compete with foreign players and recapture the lost market share.

Clear benefit for ingredient suppliers

Currently, major HMOs suppliers in the Chinese market are foreign companies like Chr. Hansen, FrieslandCampina and DSM-Firmenich. As HMOs are expected to be a key selling point, the orders for HMOs from Chinese companies will increase.

Future Outlook

With HMOs approved in China, more infant formula companies will increase investment in this ingredient and launch more HMOs-fortified infant formulas and children's milk powders, spurring a new round of product upgrades in the Chinese market. However, over adoption of this ingredient could also lead to product homogeneity. Differentiation and R&D capabilities thus remain the key to winning market share. Companies need to build proprietary strengths and distinctives.

Source: Chemlinked

Note: This article is compiled by Antion. Please indicate the source for reprint.