(Yicai) Feb. 27 -- Chinese infant formula producers are expected to have entered a small recovery cycle lasting two to three years after four years of struggling, but overcapacity and competition issues still need to be addressed, according to industry insiders.

The growth in China's infant formula market last year was mainly thanks to the increase in the country's birth rate and a boost from innovative products, the insiders noted.

Newborns increased by 520,000 from the year before, with leading infant formula brands boosting their investment in research and development, accelerating the launch of new products, and expanding the market share of ultra-premium products, the insiders added.

The Chinese infant formula marker began showing signs of recovery in early 2024, with foreign milk powder brands performing exceptionally well. Sales of Danone rose 4.3 percent last year from the prior one, with those in China jumping 8 percent, the French food giant said in a financial report yesterday.

Friso, the infant nutrition brand of one of the world's largest dairy firms Royal FrieslandCampina, reported a double-digit growth in the Chinese market, with a jump in revenue and operating profit. New Zealand's A2 Milk saw its income surge 10.1 percent in the six months ended Dec. 31 from a year ago, mainly thanks to growth in China and other Asian markets.

Swiss multinational food and drink giant Nestlé said its infant formula business in China achieved high single-digit growth. Illuma, a baby formula brand under Nestlé Wyeth Nutrition, returned to growth.

The infant formula market will likely grow 3 to 5 percent this year, independent dairy analyst Song Liang told Yicai. However, the sustainability of this recovery is in doubt, with uncertain prospects for the birth rate, Song added.

Issues such as overcapacity and homogeneous competition are still being addressed, and industry competition is unlikely to diminish, Song pointed out.

China's maternal and baby product category is expected to enter a rebound cycle this year, which will last two to three years, NielsenIQ, the world's leading consumer intelligence company, said to Yicai.

Foreign dairy powder companies in China are actively responding to competition by accelerating the launch of new formulas and products with innovative technologies and investing in the whole nutrition segment. FrieslandCampina is entering the adult nutrition market, while A2 Milk has revealed plans to launch a fortified milk powder for children aged three and above this year, targeting immunity and brain development.

Editor: Martin Kadiev