中國嬰兒配方奶粉報告：成長的煩惱

1、Global FoodChinese infant formula Growing painsOnce a strong growth engine, Chinese infant formula has become a challenged category given the lower birth rate, rise of local competition and ever-changing regulation.However, innovative companies with super-premium brands in the right channels and reg

2、ions could buck the trend.FOCUS#foodrevolutionEuropean Consumer Staples Warren Ackerman+44 (0)20 3134 1903 HYPERLINK mailto:warren.ackerman warren.ackerman Barclays, UKSriram Gurijala+44 (0)20 7773 1066 HYPERLINK mailto:sriram.gurijala sriram.gurijala Barclays, UKArthur Reeves+44 (0)20 7773 3622 HYP

3、ERLINK mailto:arthur.reeves arthur.reeves Barclays, UKIain Simpson+44 (0)20 7773 3616 HYPERLINK mailto:iain.simpson iain.simpson Barclays, UKEuropean Chemicals Sebastian Satz, CFA+44 (0)20 3134 7201 HYPERLINK mailto:sebastian.satz sebastian.satz Barclays, UKU.S. Medical Supplies & Devices Kristen St

4、ewart, CFA+1 212 526 6965 HYPERLINK mailto:kristen.stewart kristen.stewart BCI, USBarclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that

5、 could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research ana

6、lysts with FINRA.Please see analyst certifications and important disclosures beginning on page 108.Summary of our Ratings, Price Targets and Earnings Changes in this Report (all changes are shown in bold)CompanyRatingPricePrice TargetEPS FY1 (E)EPS FY2 (E)Old New 12-Mar-20OldNew %Chg Old New %Chg Ol

7、d New %ChgEuropean Consumer StaplesNeu NeuDanone (BN FP / DANO.PA)OWOW52.9080.0070.00-134.03 3.88-44.25 4.08-4Nestle SA (NESN SW / NESN.S)OWOW90.13115.00105.00-94.64 4.34-65.05 4.72-7Reckitt Benckiser Group PLC (RB/ LN / RB.L)OWOW515067006400-4287.0 287.0-304.9 304.9-Source: Barclays Research. Share

8、 prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency. FY1(E): Current fiscal year estimates by Barclays Research. FY2(E): Next fiscal year estimates by Barclays Research.Stock Rating: OW: Overweight; EW: Equal Weight; UW: Underweig

9、ht; RS: Rating Suspended Industry View: Pos: Positive; Neu: Neutral; Neg: NegativeChinese infant formula Growing painsChinese infant nutrition has been the most dynamic market in Global Food: It has grown 11- fold from 2bn in 2004 to 23bn in 2019, driven by high birth rates, income growth and premiu

10、misation. However, growth has come down from double-digits over the last decade to low single-digits currently, given declining birth rates, tougher local competition and regulation. RBs 5bn write-down of Mead Johnson illustrates the challenges in the market. Super-premium brands with unique proposi

11、tions (e.g. organic, HMO) are growing double-digits while the rest of the market is declining.Locals are catching up: A step-up in regulation in 2018 has eliminated 1000 smaller domestic players which had inadequate quality/safety standards, leaving a bigger share for better equipped local champions

12、 such as Feihe and Junlebao, especially in lower-tier cities, where more of the growth is located. With these stronger local companies premiumising and pushing into maturing tier 1/2 cities, the question is whether multinationals can replicate their success in tier 3/4/5 cities, which requires wider

13、 reach, lower-prices and local marketing.But multinationals could benefit in the short term as safety concerns grow: While regulatory changes have increased consumer trust from a food safety standpoint, recent issues like African Swine Fever and, more recently, Covid-19, are likely to have made cons

14、umers more risk-averse. We see consumers switching from local to imported brands in the short term, as a precautionary move. Covid-19 could also result in a marked reduction in Chinese births in 2020e. We estimate 13.5m in 2020, down 8% on 2019.Companies to invest in cross-border e-commerce (CBEC) a

15、s the Mum & Baby store (MBS) channel matures: As the infant milk formula (IMF) category has become increasingly sophisticated given rapid innovation, access to expert advice, the ability to touch, feel and sample products, and in-store access to a wider array of childcare have led to rapid growth in

16、 the MBS channel. However, the lower birth rate is likely to drive further MBS consolidation. The CBEC channel is likely to be a winner as the registration process needed to approve new (premium) product launches has ground to a halt, with this channel one way to mitigate this.Who is best placed to

17、win? We think Nestle and Danone are best positioned to succeed in this market. Feihe (not covered) is the biggest local threat. RB and Abbott both have strong premium brands but are exposed to the declining mainstream segment and losing share. Ausnutria, Mengniu (which acquired Bellamys) and a2 (all

18、 not covered) are the key competitors to watch out for. They have leadership positions in A2 proteins and goats milk, which are driving strong growth. Mengniu and Yili are also gaining share but more in lower price tiers, so less of a threat.Forecast changes and valuation: We cut our price targets f

19、or Nestle (CHF115 to CHF105), Danone (80 to 70) and Reckitt (GBp 6,700 to GBp 6,400) to reflect Covid-19 driven EPS changes and lower sector multiples but remain Overweight on all three.CONTENTS HYPERLINK l _TOC_250025 Chinese Infant Milk Formula Market Map 5 HYPERLINK l _TOC_250024 Market landscape

20、 top 10 companies, M&A and JVs 6 HYPERLINK l _TOC_250023 Market landscape top 20 IMF brands globally and in China 7 HYPERLINK l _TOC_250022 Executive Summary 8 HYPERLINK l _TOC_250021 How does this affect our investment views? 9 HYPERLINK l _TOC_250020 Our thesis in pictures 10 HYPERLINK l _TOC_2500

21、19 What are companies saying on Chinese IMF? 16 HYPERLINK l _TOC_250018 IS CHINESE IMF STILL ATTRACTIVE? 18 HYPERLINK l _TOC_250017 Chinese IMF has been a key growth driver in Global Food 19 HYPERLINK l _TOC_250016 But growth has slowed and we see further downside 23 HYPERLINK l _TOC_250015 Could lo

22、wer birth rates lead to policy intervention? 26 HYPERLINK l _TOC_250014 Regulatory change is rebuilding trust in local brands 28 HYPERLINK l _TOC_250013 Chinese players are consolidating the market 32 HYPERLINK l _TOC_250012 Lower-tier cities are driving all the growth 34 HYPERLINK l _TOC_250011 Low

23、er-tier cities need a different approach to marketing 36 HYPERLINK l _TOC_250010 Premiumisation has more runway 38 HYPERLINK l _TOC_250009 Innovation to continue to drive premiumisation 44How could category margins evolve? 50 HYPERLINK l _TOC_250008 More channel shift CBEC to gain share as MBS matur

24、es 53 HYPERLINK l _TOC_250007 COMPANY PROFILES 58 HYPERLINK l _TOC_250006 Nestl the most premium IMF portfolio 59 HYPERLINK l _TOC_250005 Danone best-performing IMF player since 2012 66Feihe Dairy the next no.1 in Chinese IMF? 74 HYPERLINK l _TOC_250004 Reckitt: Was the $17bn Mead acquisition a step

25、 too far? 81Abbott Nutrition is a drag on growth. Options? 88Ausnutria leader in imported goats IMF 90Mengniu expanding Bellamys in the MBS channel 91The a2 Milk Company pioneer in a2 but competition catching up 92Junlebao a local champion but limited risk to multinationals 93 HYPERLINK l _TOC_25000

26、3 Yili premiumising lower-tier cities 94FrieslandCampina struggling premium portfolio 95H&H Group strong innovation but not a threat 96 HYPERLINK l _TOC_250002 Implications for ingredients companies 97 HYPERLINK l _TOC_250001 DSM HMO the next growth driver as DHA/ARA mature 98 HYPERLINK l _TOC_25000

27、0 FORECAST/ PRICE TARGET CHANGES 100Barclays | Global FoodChinese Infant Milk Formula Market MapNotes: Feihe, Ausnutria, Mengniu, Junlebao, Yili, Friesland Campina and H&H are not covered by Barclays Research. Source: Euromonitor, Barclays ResearchMarket landscape top 10 companies, M&A and JVsThis c

28、hart shows the top 10 companies in Chinese infant formula, their top brands in the market, key acquisitions and joint ventures.In terms of M&A, Danone was early to enter the market with the Numico acquisition in 2007, followed by Nestls Wyeth acquisition in 2012 and Reckitts Mead Johnson acquisition

29、 in 2017. Other major multinationals, for example, Abbott and Friesland Campina have built their Chinese infant formula operations largely organically. Elsewhere, we would flag Mengnius recent acquisition of Bellamys in 2019, giving Chinas largest dairy manufacturer access to a leading organic IMF p

30、ortfolio.FIGURE 1Chinese IMF 2019 market share by company, key brands in the market, M&A and JVsNote: Feihe, Ausnutria, Mengniu, Junlebao, Yili, Friesland Campina and Health & Happiness (H&H) are not covered by Barclays Research, Source: Euromonitor, Barclays ResearchMarket landscape top 20 IMF bran

31、ds globally and in ChinaThree of the top five brands in Chinese IMF are local brands, with their cumulative share doubling over five years. This illustrates the resurgence of Chinese formula manufacturers in recent years, after significant share loss after the melamine toxic milk crisis in 2008.Most

32、 of the success of the local players has until now been focused on lower-tier cities and in lower price points, but this is now beginning to change. Players like Feihe are operating more at the premium and super-premium price points and are now turning their attention to the larger coastal tier-1 an

33、d 2 cities. Other local players, such as Junlebao and Yili, are both doing well, but for now continue to focus more on the mainstream segment and on tier 3-5 cities.Danones Aptamil and Nestls Illuma are the other two brands in the top 5, with Aptamil being the big outperformer i.e. share up four-fol

34、d since 2014. Nestl turned its super premium brand illuma into a billionaire brand in 2019 from virtually nothing seven years ago.Globally, Reckitts Enfamil is the no.1 brand given its strong position in the US (35% share) but it has been losing share in China. Abbotts Similac is also in a similar p

35、osition i.e. no.2 in US IMF with a 30% share but much less strong in China. Both these brands have suffered from a lack of exposure to the super-premium segment, in our view. The other notable brands in the global top 10 are Friesland Campinas Friso (5% share in China) and Nestls Nan brand.FIGURE 2M

36、arket shares in Global/Chinese IMFSource: Euromonitor, Barclays ResearchExecutive SummaryThe Chinese Infant Formula market has grown around 11-fold from 2bn in 2004 to 23bn in 2019. It accounts for c.50% of the global IMF market, twice that of the US, and drove two-thirds of global growth in 2019. T

37、his exceptional growth has been driven by high birth rates, significant trading-up and premiumisation, with gross margins as high as 80%.However, the category is slowing. Birth rates are declining despite a relaxation of the one-child policy. In 2019, there weremillion fewer babies born vs. 17.9m in

38、 2016, driving volumes lower. Moreover, we see further downside in 2020 (BARC est. 13.5m i.e. -8% YoY) given the outbreak of Covid-19, as couples delay having children until the risk of infection goes down.There are other structural headwinds to population growth in China. The number of women aged 2

39、5-35 (key child bearing age) will decrease by c.40 million in the next 10 years and the implementation of the two-child policy has not had the desired impact. In addition, the cost of raising a child is significantly higher in China buying premium formula every month for a 2 3-month-old baby can cos

40、t up to c.40% of monthly salary. If there is another down year in terms of births, which we think is likely in 2020, we would not be surprised if the government takes action. Better maternity benefits would be an obvious area.New regulation introduced in 2018 to address food safety issues has consol

41、idated the market and local manufacturers seem to be gaining traction. The market share of the two biggest Chinese IMF companies, Feihe and Jun Le Bao, has doubled in the last two years while that of Nestle, Danone, Reckitt and Abbott combined has flat-lined. In June19, the government announced a ta

42、rget to reach 60% self-sufficiency within three years i.e. 60% of total IMF consumption manufactured locally by 2022. This comes at a time when lower-tier cities, where domestic companies have a strong position, are outperforming.Companies are now looking at growth opportunities in lower tier cities

43、 Birth rates in tier 4 cities and below is almost twice that of the rest of the country. While distribution is a key challenge for multinationals, the main question is if they have the right portfolio and go-to market strategy to succeed in tier 3/4/5 cities. We think this will be an uphill battle a

44、nd is likely to take a year or two for multinationals to find the right product at the right price point to deliver on local consumer preferences.Lower-tier cities need a unique marketing model to drive awareness and penetration. As consumers in lower-tier cities are less likely to fully comprehend

45、the science behind IMF (infant milk formula) products, educating them and developing brand awareness is crucial. For example, Feihe held more than 500,000 face-to-face seminars with Chinese mothers, educating them about the advantages of its products. Interestingly, with increased trust in the categ

46、ory, safety has become less of a concern and the focus is now back on product superiority and functional benefits, making innovation crucial.We see a2 formula, HMO, tailored nutrition, goats milk, stage 4 milks and plant-based IMF as the next big drivers of growth and premiumisation in the category.

47、 Nestls recent roll out of its HMO innovations across 40 countries is a case in point. The company achieved sales of CHF600m in year 1 and CHF850m by year 2 i.e. 2019 despite not being present in China because of registration delays. Having compelling offers in these segments will be a crucial deter

48、minant of market success.Premiumisation set to continue. Since the Melamine scare in 2008 when 300,000 babies were hospitalised, Chinese parents have favoured premium formula the weight of the premium segment is up from 5% in 2004 to 97% in 2018, according to Nestle. While the average price of IMF i

49、n China has almost doubled since 2005, there remains significant room for further premiumisation as long as it is backed by compelling science. Covid-19 will in our view accelerate the pace of premiumisation.CBEC to gain share as MBS matures: The longer registration process to launch new brands in C

50、hina has been a problem for companies, especially multinationals. Moreover, the government has put all applications on hold as it focuses its finite resources on addressing COVID-19. As a result, we expect the likes of Nestle and Danone to try to circumvent the issue by expanding in CBEC to bring ne

51、w innovations (e,g, illuma HMO) to the Chinese market. While the Mum & Baby Stores channel consolidates, we expect cross-border e-commerce to gain share, C2C to remain stable and the traditional trade to decline.We rate all the key IMF players on six factors: 1) Premiumisation: Nestle, Feihe and Rec

52、kitt have the premium-most brands in the market. 2) Breadth of portfolio: Danone and Abbott have the widest portfolios. 3) Position in tier 1/2 cities: Multinationals have historically been stronger here as they have more premium portfolios. 4) Position in tier 3/4/5 cities: Given stronger distribut

53、ion and local marketing capabilities, local companies score highly here. 5) Channel mix: Feihe is well placed in both MBS and e-commerce, while Danones balanced channel mix and stake in Yashili is an advantage. 6) Current trading: Feihe, Junlebao (the top two Chinese players) and Ausnutria have been

54、 the biggest share gainers in the last two years.How does this affect our investment views?Nestl (OW, PT CHF 105)We are confident that Nestl will deliver mid-single-digit OSG in the mid-term. CEO Mark Schneider has been clear there could be as much portfolio change in the next three years as in the

55、past three years (i.e. 10% of the portfolio rotated). In China baby, Nestl has five big tasks: (1) maintain the momentum of its key super premium brand Illuma; (2) turn around the performance of S26; (3) develop adjacent growth opportunities i.e Gerber cereals and maternal nutrition; (4) build up it

56、s cross border e-commerce capabilities; and (5) quickly penetrate lower-tier Chinese cities to capitalise on growth. We currently expect Nestls Nutrition business to grow c.4% in the medium term. However, if the company is able to turn around S-26 in China and accelerate the growth of Gerber, we see

57、 upside. Nestl will also be advantaged if the government enforces its 60% local production rule, as Nestl is fortunate in having under-utilised dairy factories in China, which could be scaled back up.Danone (OW, PT 70)The Chinese IMF market accounts for c.10% of Danones group sales but has been driv

58、ing a disproportionate share of growth as high as 80% in 2017 when the European dairy business was struggling. With growth in its biggest category, yoghurt, remaining soft and plant-based being a longer-term story, infant formula will play a crucial role in a) sustaining the current run rate of 2-4%

59、 OSG and b) achieving its longer-term target of 3-5% OSG. While the company has done an impressive job of pivoting its IMF business to the direct channel, it now needs to concentrate resources on developing its ultra-premium portfolio. Expansion in lower-tier cities is underway, but continued innova

60、tion and leveraging its CBEC capabilities remains key. We think its Aptamil brand is one of the strongest brands in the Chinese infant formula market.Reckitt (OW, GBp PT 6,400)To achieve its mid-single-digit growth target by 2023, Reckitt will need to turnaround the IFCN business to 2-4% OSG from a