Baby boom may support the dairy industry

The per capita consumption of dairy products in China still has more room for improvement than the international level. Dairy products (such as milk powder, fresh milk, etc.) are, to a certain extent, mandatory consumer products. Statistics show that domestic per capita dairy product consumption is about 1/5-1/4 of the world average. In the future, as the process of urbanization continues to progress rapidly and the level of social welfare increases, consumers’ demands for health will increase, and dairy products will meet the needs of the consumer groups. Therefore, China’s dairy products will be viewed in the long term. The industry will also maintain a relatively high level of growth.

The revising of the new national standard in the dairy industry is conducive to the improvement of industry concentration; the downside of inflation is conducive to relieving the pressure of rising dairy industry costs. After the industry crisis that experienced the melamine incident, the new national standard for dairy products has once again caused controversy. Due to the high degree of attention from the media and the public, the market generally expects that after this new revision of the national standard for dairy products, the standard increase will be a high probability event. After many years of diversified business operations, industry leading companies have had a strong competitive advantage in terms of milk sources, brands, channels, and marketing. In the future, the concentration of these companies will be beneficial to these companies. In addition, according to Wind Data, the price of raw milk in major domestic producing areas has climbed from a high of 2.31 yuan per kilogram in August 2009 to a high of 3.2 yuan per kilogram in early 2011. With the CPI's apparent decline in November, the gradual fall in raw milk prices will ease the cost pressures of dairy companies.

The new round of baby boomers and the possible release of future family planning policies will support the demand for industry products. Next year is the Chinese traditional lunar year, and China will usher in another birth peak. CICC data shows that in the past decade, China’s newborn population has stabilized at about 16 million annually. Since the birth population in the next 10 years will be born during the baby boom period of 1985-1997, the number of newborns in the next 10 years will have a more significant increase. In addition, the possibility that the government plans to liberalize the one-child policy after several years will also constitute an additional growth driver for the domestic dairy market.