Can Feihe's "going to sea" strategy succeed?
In recent years, it is not new for dairy companies to "go overseas".
A few days ago, Feihe (6186. Canada's Canadian subsidiary, Canada Royal Milk, announced on its official website that it has been approved by Health Canada and the Canadian Food Inspection Agency (CFIA), and the first batch of infant formula has entered the production stage, and the finished product will be sold in local retail channels this summer.
According to incomplete statistics, in addition to Feihe, Yili (600887. SH), Mengniu (2319. HK), Shengyuan, Biostime and other dairy companies have also implemented the "going out" strategy. Feihe obtained Canada's first infant milk powder license, what products will be produced and sold in the future, and will such products be recognized by local consumers?
The Canadian subsidiary has started production of infant milk powder
According to media reports, Feihe's Canadian subsidiary has obtained the permission to produce infant milk powder this time, becoming the first local infant formula milk powder manufacturer. Construction of the production plant began in June 2017 and commissioning was completed in 2019.
The reporter tried to contact Feihe's external spokesman to inquire about the specific situation of the infant milk powder that the Canadian subsidiary is about to sell and whether it is synchronized with the domestic products on sale. The other party said that it will not be announced to the public at present.
However, according to an article published by the Canadian Federation of Chambers of Commerce and Industry in August 2017, Feihe's 28,000-square-meter factory in Kingston will have a milk powder production line and a goat milk powder production line. About 20% of the milk powder produced by the plant will be sold in the North American market, and the rest will be sold to the Asian market.
Whether the plan will change is subject to the announcement of the Canada Royal Milk infant milk product launch event.
It is worth mentioning that since its establishment, Feihe has been focusing on the development of products that are "more suitable for Chinese babies". The company pointed out in its annual report that it will strive to build China's "dairy core" and maintain a leading position in China's breast milk research field. If Canada Royal Milk's infant milk powder on the shelves this summer is a domestic formula, will its products be "unadaptable"?
At present, there is no information about infant milk powder on the product page of Canada Royal Milk's official website, and only one goat milk powder called CAPRISS is on sale. The company's introduction to CAPRISS goat milk is rich in vitamin D and is the first high-quality whole goat milk powder in North America.
Click Buy, and the page will automatically jump to the Amazon platform. As can be seen from Amazon, a can of CAPRISS goat milk powder weighs 640 grams and costs US$49.99 (about 362.28 yuan), which can be used with beverages, cereals, and can be used for baking, cooking and other purposes.
Overseas business income halved
According to industry consulting firm Frost & Sullivan, retail sales in the domestic infant formula industry have maintained a downward trend since 2019, and it is expected that by 2025, the retail sales volume of this market will fall to 764,900 tons, with a compound annual growth rate of -4.1% from 2020 to 2025.
With the continuous decline of the domestic newborn population and the decrease in the demand for infant milk powder, in order to maintain a steady growth in performance, in addition to enriching the product structure, "going overseas" has also become an important development strategy for many dairy companies.
It is reported that in addition to Feihe, Yili, Mengniu, Shengyuan, Biostime and other dairy companies have also implemented the "going out" strategy.
Taking Mengniu as an example, from 2019 to 2023, the company's operating income from overseas regions will be 711 million yuan, 1.829 billion yuan, 3.073 billion yuan, 4.595 billion yuan, and 4.288 billion yuan respectively. It can be seen that the revenue of Mengniu's overseas business has doubled in recent years, contributing a lot to its total operating income.
However, for Feihe, the effectiveness of its "going to sea" strategy may be gradually decreasing.
According to the company's annual report and annual results announcement, from 2019 to 2023, Feihe's operating income from overseas markets will be 559 million yuan, 288 million yuan, 219 million yuan, 208 million yuan, and 244 million yuan respectively. In 2023, the company's overseas revenue will increase by 37.797 million yuan in Canada, and if the sales revenue of the new region is excluded, Feihe's sales revenue in the original overseas market will continue to decline.
It should be noted that, according to the Canadian Federation of Chambers of Commerce and Industry, Canada has not produced formula milk for many years before introducing Feihe into the local market, and the local dairy authority has been looking for local formula milk producers, but no company is interested in expanding its business to formula milk.
As early as 2023, there were also reports that due to the "milk powder shortage" crisis in the United States, the formula milk shelves in Toronto, Canada, were basically emptied. Health Canada has also introduced a temporary policy to facilitate the importation of equivalent infant formula from other countries with similar high quality and manufacturing standards as Canada.
Feihe has taken Canada as another key overseas market and established a local production plant, which has alleviated the dilemma of Canada's infant formula supply relying only on imports to a certain extent. At the same time, with the company's infant milk powder about to go on sale in the local market this summer, its overseas revenue situation may change.
Special Medical Milk Powder is not available for sale online
According to Feihe's Tmall flagship store, there are currently 7 series of infant milk powder on sale, namely Xingfeifan, Xingjie Youhu, Zhenai Beihu, Feifan, Zhenzhi Organic, Xiaoyang Miaoke, and Zhuorui A2 Casein.
Among them, the Xingfeifan series is the best-selling and is also the main series of products of Feihe. Probiotics are added to Star Rank Care, which is suitable for babies who have poor digestion and absorption, and are prone to constipation. Gluoferrin is used to improve your baby's immunity. Sails are standard formulations that are affordable and can meet general needs. Little Lamb is a goat milk powder, which is suitable for babies with poor digestion and absorption and milk protein allergy.
It should be pointed out that since 2021, the sales revenue of Feihe infant formula milk powder has continued to decline, from 21.515 billion yuan in 2021 to 17.877 billion yuan in 2023, and the company urgently needs to find new performance growth points.
Earlier, some experts pointed out that with the continuous improvement of women's reproductive age in modern society, the proportion of caesarean section and premature babies is increasing significantly, and the market demand for special medical infant formula continues to expand, and it is expected that the market will have greater room for growth in the future.
iiMedia Consulting's report data confirms this statement. According to iiMedia Research, in 2020, the size of China's special medical food market increased from 2.59 billion yuan in 2016 to 7.72 billion yuan, an expansion of about three times. It is estimated that by 2027, the market size will reach 23.42 billion yuan.
Perhaps because of the development prospects of this track, in 2021, Feihe launched the first infant milk powder for special medical purposes "Beishuxiao". Recently, the company has launched two special medical purpose milk powders, "Beishuwei" and "Beishuhuan".
Among them, "Beishuxiao" is a lactose-free formula, the protein is completely provided by whey protein, and lactose is completely replaced by other carbohydrates, ensuring that lactose is not added to each raw and auxiliary materials, and at the same time, it also adds patented OPO, taurine and 5 kinds of nucleotides and other nutrients.
The target group of "Besuvi" and "Beshuhuan" is premature/low birth weight infants, and there are some differences in the formula for different gestational ages and birth weights.
For example, "Besuvi" is aimed at premature infants with a gestational age of less than 34 weeks and a birth weight of less than 2000g, and the medium-chain triglycerides (MCTs) added to its formula account for about 30% of the total fat, and the low lactose content is 55%, containing DHA, ARA, choline and other components.
"Beishuhuan" is aimed at premature infants with a gestational age of more than 34 weeks or insufficient breast milk after discharge, and the MCT added to its formula accounts for about 20% of the total fat, and the proportion of low lactose is 75%, containing structural lipids (OPO), galacto-oligosaccharides (GOS), choline, DHA, ARA and other ingredients.
However, the above three products are not currently sold on online platforms such as Jingdong, Taobao, Pinduoduo, etc., the reporter contacted Feihe offline dealers for consultation, and the other party replied that Feihe products have regional protection, and the above three products are sold in stock.