Online demand for infant formula in China real opportunity, says Bord Bia

A surge in online demand for imported infant formula among Chinese consumers represents a real opportunity for the Irish dairy sector, according to Bord Bia.

Shanghai-based Bord Bia analyst Nick McIlroy stated: “The massive growth in demand for imported infant formula via e-channels indicates how broader retailing trends are increasingly reflected online. Chinese parents are snapping up infant formula imports, which are perceived as safer and of higher quality.”

Mr McIlroy cited the latest report by global consumer markets analysts McKinsey on the soaring development of e-retailing in China. With online sales in 2012 roughly equal to Ireland’s total GDP of €159bn, and a compound annual growth rate of 120% since 2003, online retailing is playing an increasingly important role in expanding household consumption levels in line with the Chinese government’s economic policy targets.

“China is the world’s second largest consumer market. As with most statistics relating to China in the 21st century, the data presented in McKinsey’s report is nothing short of phenomenal. The government’s economic policy targets are aimed at restructuring the key drivers of economic growth by increasing the domestic market while reducing dependency on export-led growth.”

A report of the 18th National Congress of the Communist Party of China last November indicated that household consumption should account for 45% of GDP by 2020, rising from the 2010 figure of 38.8%.

The McKinsey report also highlights other ways in which online retailing is reshaping the Chinese economy by “lowering retail price for customers and driving significant growth in adjacent sectors”.

Motorcycle delivery drivers laden down with Yihaodian and Taobao packages — both giants in the e-retail sector — are an increasingly common sight in China’s cities, representing just part of the $13bn (€10bn) e-retail service provider industry.

Figures for March from Taobao.com, considered China’s most popular retail platform, show that sales volume of imported milk formula in one seven-day period was nearly 12 times that of the same period last year, up 13.4% compared to just one week before.

“Developments arising from e-retailing will drive efficiencies in traditional retailing too, as the entire supply chain changes to meet the purchase demands of China’s 600m internet users from its estimated six million online merchants,” concluded Mr McIlroy.