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How China’s new baby boom impacts brands

With the relaxation two years ago of the infamous one-child policy to allow all couples to have two children, China is witnessing a tsunami in the number of recorded births. After 35 years of strict policy, the ruling Communist Party eased family planning restrictions to help alleviate the economic demographic strains on an increasing ageing population. With a population estimated to be over 1.4 billion and a forecast of nearly a quarter of the population being over 60 by 2030, something needed to be done.

The new policy came into force on January 1st 2016, after an estimated 400 million births had been prevented. According to a BBC News report on the impact of the new policy in October 2016, they felt that the new two-child policy was unlikely to have a big effect on the birth rate as small families were the social norm. But, as has become increasingly clear, the Chinese consumer is in the midst of a transformation that offers tremendous new opportunities.

Photo: China.com

 

With GDP growth around 6.9% and consumer confidence at record highs, the number of new births in China reached 18.46 million, an increase of more than 2 million over 2015, according to China’s National Health and Family Planning Commission as reported in China Daily in August.

While below the government’s anticipated figure of 20 million, and falling short of population replacement levels, it would still put the new-borns as equivalent to the 61st (out of 233) largest country in the world according to worldometers!

Brands are now seeing the impact of a new country of babies, with exponential growth in the sales value of infant products in China! According to Nielsen’s 2017 Chinese Infant Product Industry Report, the market reached RMB123.2 billion or US$18.6 billion (Sep 2016 – Aug 2017), an 11% growth vs. 3.9% last year!

But, a word of caution; the impact of the two-child policy doesn’t apply to every Chinese province. Some provinces have seen a dramatic increase in the birth rate, while others are still relatively low.

The good news for brands is that the new Chinese mother is willing to pay a higher price for quality products – 50% of Chinese mothers said they valued the product brand over price! The key drivers are brand upgrade and convenient purchase channels, according to the report. Chinese parents have a better quality of life, and like all parents want to give only the best to their babies!

“With this large group of affluent parents who are willing to spend money on their children coming up, their spending power on the infant product market cannot be neglected,” says Vishal Bali, Managing Director of Nielsen China. “It is therefore important for brand marketers to target at provinces with good growth potentials and identify their target parent segments, so as to maximize the profit and opportunities by reaching the parents with the right channels and the enhanced product choices and range.”

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