Economic and demographic forces are amongst the major factors slowing the industry.
The China dairy industry is grappling with economic and demographic pressures, signaling a potential end to a decades-long growth boom, according to S&P Global Ratings’ “China’s Long Dairy Boom Starts to Fade” report.
“Moderating growth in China’s dairy sector will compel rated firms to enter new categories and to expand offshore, pushing up leverage and adding volatility to earnings,” said S&P Global Ratings credit analyst Flora Chang.
The report showed that the country’s top three dairy firms, namely Inner Mongolia Yili Industrial Group, China Mengniu Dairy, and Bright Food Group, saw sales drop 9%-13% in the first half of 2024.
“Slower growth in China’s dairy sector will prompt entities to make riskier bets,” said Chang.
“We think the downturn is temporary, and that China’s dairy market will continue to grow,” she added.
Chang forecasts a 2%-3% compound annual growth rate over the next 20 years, half the pace seen in the previous two decades. This slowdown is driven by a shrinking population and lower economic growth, with reduced dairy consumption expected due to lower birth rates and an aging population.
Whilst the aging population could boost demand for adult milk formula in the long term, it is unlikely to offset the drop in infant formula sales, she pointed out.
In 2023, infant formula sales were six times larger than adult milk in revenue, despite being only 60% higher in volume.
If you want share any News related Agriculture with us than send at info@agrimoon.com with your contact detail.