The volatile situation in the Chinese market reflects the flurry of changes in the regulations controlling the infant formula sector.

These restrictions, which have changed the competitive landscape, include limits on the number of brands that can be marketed by a single company and controls on cross-border e-commerce. With sales slowing, and prices coming under pressure, manufacturers are currently jostling for position.

The announcement by The A2 Milk Company that it had acquired a stake in one of its suppliers – Synlait Milk– is the latest in a spate of changes in supply patterns over the last few months.

The activity was kicked off in December when Mead Johnson and Murray Goulburn announced that they were dissolving the framework agreement that they signed in March 2016.  This was followed just a few months later by Mead Johnson’s decision to acquire spray drying facilities from Bega Cheese, which has been supplying Mead Johnson since 2009.

A few weeks later, A2 made its own move to bring supply in-house with the purchase of an 8.2% stake in Synlait. A2 and Synlait had already had a special relationship, after Synlait designated A2 its preferred customer, while Synlait was given the exclusive right to supply A2 in a number of countries.

The stake in Synlait was acquired from FrieslandCampina, which had originally purchased its shareholding to ensure its own infant milk supply in the Asia Pacific region. FrieslandCampina has since established a joint venture in China with China Huishan Dairy, and this JV has now begun producing infant formula locally.

These behind-the-scene changes illustrate the importance of China’s market to the global infant formula industry. Prospects may not be as bright as they were five years ago, but the prize is too large for anyone to want to throw in the towel in a market currently worth over $13bn and predicted by GlobalData to grow by more than 50% by 2020, boosted by the forecast rise in the number of babies following the abolition of the ‘one-child’ policy.

Click here for more information from GlobalData on baby food in China.