Special Medical Food: The halftime battle between Shengyuan and Flying Cranes and Nestlé and Mead

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Wen | to good finance

Under the background of the continuous decline in the birth rate of newborns in the mainland, the entire infant milk powder market has also continued to shrink. Even with the stimulation and benefits of the "two-child policy", many "anxious" dairy giants have still opened the "self-help" mode in advance.

At present, the domestic infant milk powder players represented by Feihe seem to have made two preparations: one is to vertically tap the stock market and transform into a high-end and ultra-high-end milk powder brand market; the other is to expand the incremental market horizontally, such as entering the dairy business field such as goat milk powder, adult milk powder, and cheese sticks.

Nowadays, Feihe and Ausnutria seem to have set their sights on the special medical use formula food track occupied by international veteran players such as Nestlé and Mead Johnson, and registered and approved the infant lactose-free special medical formula food "Bei Shu Elimination" and "Zhi Shu" series last year. Domestic dairy companies such as Shengyuan, Beiyinmei and Yili have also made efforts in the field of special medical food.

So, why is the special medical food track optimistic about the domestic dairy giants? What market opportunities are there? Can feihe and Ausnutria re-emerge from the Jedi in the field of infant milk powder by overseas big names such as Nestlé? All of this is worth exploring.

Special medical food on the vent

It is understood that special medical food is a special food between drugs and foods, which does not have a therapeutic effect, but can provide essential nutrients for the human body with less consumption.

According to the General Principles of Formula food for special medical purposes, according to the age of the user, special medical foods can be divided into infant formula for special medical purposes and formula foods for special medical purposes, of which the latter can be further divided into total nutrition types, specific total nutrition types and non-total nutrition types.

The reason why the special medical food track is optimistic about the dairy giants such as Feihe is because the special medical food has a large and stable consumer population, and with the continuous release of market consumer demand, the special medical food track as a whole is in the market rising period.

Leaving aside the adult special medical food, according to the prevalence estimate, at least about 1 million infants and young children with special medical conditions or special nutritional needs are born in the mainland every year, including people with food protein/cow's protein allergy, lactose intolerance and preterm infants/low birth weight children, as well as phenylketonuria (PKU), a rare genetic metabolic disease, and about 127,300 people who need to take special medical milk powder for life to supplement nutrition (PKU incidence in the mainland is 1/11,000).

Although compared with the traditional infant milk powder market of nearly 10 million per year, the market size of the special medical food track is slightly insufficient. However, the market pattern of infant milk powder has become mature and stable, and special medical food is still in the initial stage of development. In the United States, 65% of malnourished patients use special medical food, 27% in the United Kingdom, and only 1.6% in China, which means that the theoretical market for special medical food in mainland China has a lot of room to rise.

And coupled with the profound influence of the concept of "late marriage and late childbearing" era, the reproductive age of women in modern society is constantly postponed, and the increase in the proportion of pregnancies at an advanced age has led to an increase in the probability of birth of premature babies / low birth weight babies to a certain extent, so the market demand for infant formula for special medical purposes is also expanding. Some insiders said that it is expected that the future baby special medical food market size will exceed 10 billion yuan.

Second, the gross profit space of infant formula for special medical purposes is large, the user stickiness is strong and it is conducive to the shaping of the brand's professional image.

Special medical food, especially some infant amino acid formula special medical food, its price is not lower than high-end milk powder, generally more than 300 yuan. And due to the particularity of "half medical and half food" of special medical food, its gross profit margin is often referred to in the biopharmaceutical field, most of which are in the range of 70%-80%.

In addition, infant and young child consumer groups with special nutritional needs often have the characteristics of strong consumption stickiness and high purchase frequency.

For example, if you feed a baby with severe allergies to food protein/cow's milk protein, you need to use an amino acid formula to feed for more than 4 to 6 months, and when the allergy symptoms are alleviated, you will be converted to a deep hydrolyzed formula for 4 to 6 months, and then switch to a partially hydrolyzed formula for 4 to 6 months, and finally convert to ordinary formula.

In this long process of "desensitization", the dairy giants represented by Feihe can gradually occupy the milk powder mentality of consumers through related special medical foods, and further build the professional image of their high-end milk powder brands while laying the seeds of brand consumption for subsequent other milk powder products.

From this point of view, special medical food seems to perfectly undertake the imagination of domestic dairy giants for future market growth, and this may also be the fundamental reason why Feihe and Ausnutria have successively entered the special medical food.

The battle between the three-legged stand and the Mid-Ocean?

However, it is worth noting that as the domestic special medical food track is still in the rising stage, as of April 2022, only 83 special medical foods in the mainland have passed the registration, of which 46 are formula foods for special medical purposes and 37 are special medical foods for infants.

Judging from the composition of players who have passed the registration of special medical food, it can be roughly divided into three categories: one is the overseas nutrition and health big-name players represented by Nestlé and Mead Johnson; the other is the pharmaceutical enterprises represented by Huasen Pharmaceutical and Hengrui Pharmaceutical; and the third is the domestic dairy giants represented by Shengyuan, Beiyinmei and Feihe.

However, it is interesting that perhaps in order to maximize their competitive advantage, pharmaceutical players are mostly entrenched in the field of special medical formula food over 10 years old, Shengyuan and Beiyinmei are mainly based on the 0-1 year old infant and toddler population, while Nestlé and Abbott, which have strong technical strength and earlier entry time, cover the field of special medical food under 10 years old.

From the targeted market space, it is not difficult to see that Shengyuan, Beiyinmei, and the new players of special medical food who have just entered the game, Feihe, Ausnutria are rivals of overseas big names such as Nestle and Abbott. So can Shengyuan and Feihe recreate the market superiority of domestic brands against overseas big brands in the special medical food track?

In the view of Xiangshan Finance, even with the addition of feihe, Ausnutria and other dairy enterprises, the market pattern dominated by overseas big names in the baby special medical food track is still difficult to change in a short period of time.

The reason may lie in two points: First, the difference between the logic of milk powder and nutrition determines the different strategic directions of domestic and foreign dairy giants in the special medical food track.

The aforementioned entry of Feihe and Ausnutria into the special medical food track seems to be to alleviate the growth anxiety of the decline in the infant formula milk powder market, and its strategic focus is still infant milk powder, while the layout of goat milk powder, adult milk powder and baby special medical food and other business areas are more based on the horizontal extension of the whole category life cycle under the logic of milk powder.

Therefore, most of the new dairy players on the special medical food track choose lactose-free formulas that are highly related to infant milk powder products and have a relatively low technical threshold as the incision, aiming at lactose intolerant infants aged 0 to 12 months.

Although this move is conducive to Feihe, Ausnutria and other dairy players to enter the special medical food track in the shortest possible time, the lower technical threshold has also caused fierce competition in the field of lactose-free formulas, resulting in the price of lactose-free special medical milk powder on the market generally not exceeding 200 yuan in the case of the same quality specifications, which is almost the same as the low-end infant milk powder on the market.

However, nestlé, Abbott and other overseas dairy brands follow the logic of nutrition and health, which is related to the early awakening of overseas consumers' awareness of nutrition and health, and the public's recognition and acceptance of special medical food; on the other hand, it is also related to the time and technical advantages accumulated by international dairy giants such as Nestlé and Abbott entering the special medical food track.

Dairy expert Song Liang once said that "foreign companies have been researching in related fields for decades, and their technical reserves are more mature, so they have the advantage of being first movers and having the right to speak." "Perhaps because of this, in the field of special medical foods such as deep hydrolysis of milk protein with higher technical thresholds and more rigorous examination, amino acid formulas, and even amino acid metabolism disorder formulas for the nutritional health of niche groups, overseas big brands such as Nestlé, Abbott and Danone are involved." In contrast, in the above-mentioned special medical food field, there are no relevant domestic representative products on the market.

However, according to Xiangshan Financial Observation, in the special medical food track, Nestlé is not invincible, such as the old domestic dairy giants Beiyinmei and Shengyuan are growing into strong opponents of Nestlé.

It is understood that As early as 2018, Beiyinmei obtained the "0001" domestic special medical use formula food registration, and Shengyuan is also one of the earliest domestic enterprises to develop and produce special formula milk powder. In fact, among the products currently available to people under 10 years of age through registration, Shengyuan and Beingmate have covered a number of high-tech threshold special medical food fields such as milk protein partially hydrolyzed formulas, lactose-free formulas, preterm/low birth weight infant formulas and breast milk nutritional supplements.

On the other hand, under the barriers of technological research and development, the policy dividend has been reduced. Judging from the experience of the domestic milk powder market, the promulgation and implementation of the infant formula milk powder registration system at the policy end is the key for domestic infant formula milk powder brands to surpass overseas milk powder brands.

In the field of special medical foods with strong pharmaceutical attributes, in view of the "pain points" of the ultra-long registration cycle of special medical foods with an average of 18-36 months, in October last year, the State Administration for Market Regulation promulgated the "Administrative Measures for the Registration of Formula Foods for Special Medical Purposes (Draft for Comment)". The draft opinion shows that the on-site verification time of the regulatory authorities is shortened, and the time limit for clinical verification is compressed from 40 working days to 30 working days, so as to improve the timeliness of review.

In this regard, Beingmate said that shortening the verification time limit can accelerate the progress of research and development of new products to a certain extent. Feihe also said that it reflects the attention of the regulatory authorities to special need groups, and also allows enterprises to know in a shorter period of time whether the products have been approved and arrange production and listing in a timely manner.

From this point of view, the introduction of the new policy can indeed accelerate the large-scale listing progress of domestic special medical foods to a certain extent. However, in the view of Xiangshan Finance, this wave of policy dividends has lowered the listing threshold of special medical food terminals, and what has really opened up the gap between domestic and overseas big-name special medical foods is the front-end scientific research and technical strength.

Although special medical food is divided into food industry, the requirements in all aspects are generally higher than those of ordinary food, and research and development tend to be drugs. Therefore, the national policy requires that special medical food enterprises must integrate research and development and production, and special medical formulas need to be supported by medical clinical trial reports, which requires extremely high technical research and development professionalism of dairy brands.

Therefore, independent dairy analyst Song Liang said that special powder has stricter technical requirements, and technology research and development is not an overnight achievement, and foreign-funded enterprises have a good foundation and more advantages, which is why the market share of special powder and the proportion of foreign brands are greater.

In addition, it has to be mentioned that in the field of domestic special medical food, Shengyuan, Feihe and Nestlé are jointly facing the problem of insufficient consumer awareness in the market.

The main slogan of the "double ammonia" milk powder that appeared in the "big head doll" incident in Yizhou, Hunan Province, was a special medical food with deep hydrolyzed protein & lactose-free formula. According to the Tianyancha APP, in 2020, Abbott was fined 194.807151 million yuan for violating the advertising law, and this time it was Abbott's special medical food Xiaoansu. In addition, in September last year, Yikangyuan (Shenzhen) Health Technology Co., Ltd. was fined 14.5257 million yuan for passing off the "special yishan" solid beverage as special medical milk powder...

In fact, special medical foods often need to be taken under the guidance of doctors or dietitians in the circulation and sales stage, but because only more than 30 schools in nutrition-related disciplines in mainland China have undergraduates, and most of the graduates of nutrition disciplines have not entered the hospital to become clinical nutritionists, this has led to the lack of popularity and awareness of special medical foods by domestic consumers. According to public survey data, only 12.8% of respondents in the mainland are very familiar with special medical food.

From this point of view, the lack of market awareness and lack of standards is also one of the keys hindering the development of the mainland special medical food industry.

However, this may also give Shengyuan, Feihe and other domestic brands the opportunity to "cut a short path", after all, in the case of general lack of awareness in the special medical food market, who can achieve large-scale universal education for consumers, who may be the first to achieve the occupation of the market consumer brand mentality!

Reference Articles:

"Special Medical Food, a Nestlé Mead Johnson Erie Feihe has not yet grudges in the jianghu", consuming titanium

Accelerate! Feihe, Ausnutria, Blue River, Heshi and other dairy companies are competing for layout, and the special medical "blue ocean" is just in time", milk powder circle