Baby Food in Australia
Other baby food grew by 12% in current value terms in 2017, consistent with the double-digit growth witnessed by this category over the review period. The growth of other baby food was driven by products targeting specific age ranges, as well as the expansion of ranges to also target older toddlers. Products in this category have also continued to focus on providing toddlers with a way to explore new flavours and textures to smooth the transition from baby food to standard food. Parents are also increasing demand for healthy but convenient snacks to feed their toddlers, driving on-the-go healthy snacks. Examples include Rafferty’s Garden fruit and/or vegetable-based snack bars, as well as Every Bite Counts Pty Ltd with its Little Bellies brand of baby puffs. Demand for other baby food has been supported by industry sources, which indicate that the major supermarkets have allocated increased shelf space to baby food in the last year of the review period.
Milk formula continued to be the major contributor to value sales, with a 73% value share of baby food in 2017. Within milk formula, flat growth in value share was witnessed by Bellamy’s Australia organic milk formula range, Bellamy’s Organic. In particular, the company held a steady value share of 9% of baby food in 2016 and 2017, a marginal decline from a 10% value share in 2015. This decline was due to the impact of lower purchasing rates by daigou in late 2016. In particular, Bellamy’s Australia had lower than anticipated “Singles Day” sales in China (a major sales event) as well as a surplus of inventory which has led to a round of discounting on sites where the company was selling directly to China. As a result, daigou in Australia were faced with lower margins from selling the company’s Bellamy’s Organic milk formula and instead switched to more profitable brands such as A2 Platinum from A2 Dairy Products Australia.
Demand for milk formula from China will continue to be an important contributor to Australian value sales, particularly as birth rates in Australia will continue to stagnate. Over the forecast period, milk formula is predicted to record a 7% value CAGR at constant 2017 prices compared to a 19% CAGR over the review period. Growth over the forecast period is not expected to be as strong as major milk formula manufacturers in Australia will concentrate on improving direct sales to China. Australian manufacturers will gain from the latest changes to Chinese regulations imposing a 3-brand limit on manufacturers in an effort to improve food safety and quality of milk formula in China. This will drastically reduce the number of milk formula brands on the Chinese market, particularly from domestic manufacturers that often sell their formula under a multitude of different brands. This is set to come into effect on 1 January 2018, with better regulation and standards expected to benefit Australian exporters of milk formula, which have a strong reputation for safety and quality.
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