DAVY VIEW

Infant formula (IF) trade data (volumes) confirm that China imported c.2% less IF in 2020 versus 2019. The rate of decline was more pronounced through H2 2020. The fall follows an unprecedented period of growth, with volumes growing c.3x since 2013. Current data chime with more cautious commentary from Western IF brand owners, such as Danone. COVID has accentuated the challenge, with the cross-border channel, including the lucrative Daigou channel, materially impacted. The challenge experienced by international brands is juxtaposed against market share gains for indigenous Chinese companies such as China Feihe. Over time, we expect international operators to enhance local manufacturing platforms in China. Danone reports full-year results on February 19th – we expect commentary on the Chinese IF complex to remain cautious.