Leading brands could re-rate on high growth potential and low expectations While the market has concerns about the infant milk formula (IMF) sector's growth due to a declining birth rate, we expect leading IMF brands to maintain strong growth in the next few years. We expect the new IMF national standards, announced in March, to drive industry consolidation and increasing numbers of small companies to exit the market in the next two years. Leading brands have launched stage 4-5 formula milk products for children aged 36 to 72 months (kids formula)—the potential new sales growth driver. Based on our proprietary model, we forecast kids formula and total IMF sector sales CAGRs of about 25% and 4%, respectively, over the next five years. 

New IMF national standards to speed up industry consolidation 

With the new IMF national standards, many producers may have to adjust their product formulas, change raw materials, and reapply for CFDA registration. We expect major costs for small IMF companies, given their smaller operations and potentially significant changes in formulas. Hence, some medium and small companies might exit the market with another round of consolidation over the next few years. We forecast the top 10 brands' market share to increase from 71% in 2020 (Euromonitor) to 80% in 2025.