China imports less infant formula food from Irish-based producers in Covid year 

The Netherlands, New Zealand, France, Ireland, Germany, and Denmark accounted for around 90% of all global infant formula exports to China in 2020

Ireland is one of the largest producers in the world of infant formula, producing a high-value product for Irish farmers and delivering hundreds of direct jobs at plants across Munster that are owned by European food giants, including Danone and Nestlé. Picture: James Warwick

Irish sales of hugely lucrative infant formula food to China fell last year amid the Covid-19 pandemic, bringing to a halt a growth surge over many years of an industry that provides hundreds of jobs. 

Ireland is one of the largest producers in the world of infant formula, producing a high-value product for Irish farmers and delivering hundreds of direct jobs at plants across Munster that are owned by European food giants, including Danone and Nestlé.

The importance of the infant formula industry is illustrated by the fact that China sources about 10% of all its infant formula imports from Ireland.                         

However, new figures show that the long stretch of growth came to a halt last year, as China imported about 2% less of infant formula from all global sources following "an unprecedented period of growth", said broker Davy. 

Davy cites global market research from Italian dairy and agricultural data firm Clal, which shows that six countries — the Netherlands, New Zealand, France, Ireland, Germany, and Denmark — accounted for around 90% of all the global infant formula exports to China in 2020. 

China appears to have imported less infant formula last year from a handful of countries, including Ireland.   

"The two leading export nations, New Zealand and the Netherlands, grew export volume to China by 8% and 4% respectively in 2020, with other export countries experiencing volume declines of between 4% and 40%," said Davy analyst Cathal Kenny in a research note.

He said Davy expects similar trends to extend through the first six months of this year. 

The broker said that the new data on infant formula imports by China mirrors the "more cautious commentary" by western producers after volumes surged threefold in the past seven years.

"Danone has a manufacturing presence in New Zealand, Ireland, France, Germany, the Netherlands, and Poland," Mr Kenny said.  

"In July 2020, Danone announced a series of investments in China to bolster its local market position in specialised nutrition — including its first IF [infant formula] manufacturing site in China. A more significant in-market presence is becoming a necessity for Western IF manufacturers," he said in the note.

Late last year, Danone, which is also the world's largest yoghurt maker and produces the Evian and Vovic bottled waters, said it will focus on cutting costs amid the fallout from Covid-19 and plans to cut up to 2,000 jobs, including a significant number at regional head offices. 

Analysts said that rival Nestlé had long focused on a similar structure of giving more authority to local management. 

Nestlé said in December that underlying sales should grow in 2020 on average at roughly the same pace as in 2019.

The world’s largest food maker generates some 90% of its revenue from in-home consumption, which has benefited from lockdown and social-distancing measures.

At the same time, its sales to restaurants, canteens, and airports fell sharply during the pandemic.