On October 7, 2023, China National Health Commission (NHC) announced the approval of 2’-fucosyllactose (2’-FL) and Lacto-N-neotetraose (LNnT) as nutrition fortifiers in infant and young children formula food, infant formula food for special medical purposes, and children milk powder (please check China Food Additives in 2023: NHC Approves Two HMOs and Other Four New Food Additives for details).

With these ingredients now approved, several major Chinese companies promptly publicized their new HMO products, including Firmus, Junlebao, Yili, and Yipin.

The efficient launch of these new HMO products shows that Chinese companies have been laying the groundwork in this segment for some time. Notably, all these HMO products are children's milk powders. Because infant formulas in China require recipe registration, which takes time before obtaining approval. Becoming the first company permitted to launch an HMO infant formula is essential as it confers advantages of cementing consumer’s mindshare and demonstrating R&D capabilities. Therefore, enterprises are still preparing the registration.

What Does the Approval Mean for The Stakeholders?

Opportunities and challenges for foreign companies

As HMOs (2’-FL and LNnT) have already been approved in the US, EU, Australia and New Zealand, some HMO infant formulas from those markets have been exported to China via Cross Border E-commerce, but restricted to online sales. With HMOs now approved in China, these companies can expand the sales channels to offline markets if they obtain recipe registration for these infant formula products. This can facilitate market growth.

However, as Chinese domestic manufacturers can now produce and sell HMO products, foreign companies will face stiffer competition in this segment.

Big opportunity for Chinese infant formula companies

Under stringent supervision, permitted ingredients for infant formula in China are limited, leading to increasing product similarity. Approving new ingredients like HMOs can stimulate the market, enabling companies to develop more novel and competitive offerings.

Additionally, the previous lack of HMO approval in China constrained domestic infant formula growth in this niche segment. With HMOs now approved, Chinese companies can better compete with foreign players and recapture the lost market share.

Clear benefit for ingredient suppliers

Currently, major HMO suppliers in the Chinese market are foreign companies like Chr. Hansen, FrieslandCampina and DSM-Firmenich. As HMO is expected to be a key selling point, the orders for HMO from Chinese companies will increase.

Future Outlook

With HMOs approved in China, more infant formula companies will increase investment in this ingredient and launch more HMO-fortified infant formulas and children's milk powders, spurring a new round of product upgrades in the Chinese market. However, overadoption of this ingredient could also lead to product homogeneity. Differentiation and R&D capabilities thus remain the key to winning market share. Companies need to build proprietary strengths and distinctives.

More about HMOs

HMO is the third most abundant nutrient in breastmilk after lactose and fat. It has multiple functions including enhancing self-protection, promoting probiotic growth, inhibiting harmful bacterial adhesion, maintaining gut microbiome balance, and regulating immunity. HMOs have over 200 structures. The two now approved in China are 2’-FL, the most abundant HMO in breastmilk, and LNnT, another found in high amounts. As early as 2016, China received the first 2’-FL registration application. So far, the application has been received 10 times by the authority, reflecting the high popularity of 2’-FL.