“It took me over a week to choose the formula for my child. In the end, I chose an imported brand. While it is expensive, I thought it is more reliable in terms of ingredients and safety.”
Son Juhyun, 34, who gave birth to her first child two months ago, said this. As more parents like Son are choosing imported formula, domestic formula brands are facing tough competition.
According to statistics from the Korea Agro-Fisheries & Food Trade Corporation (aT) on the 21st, the sales amount of formula through domestic retail distribution channels recorded 15.893 billion won in the first half of 2023 and has been declining continuously. In the second half of 2023, it decreased to 14.235 billion won, and in the first half of 2024, it further dropped to 12.05 billion won.
◇ Domestic formula brands 'struggle'
Renowned domestic formula brands are struggling for years. Among domestic brands, Maeil Dairies' Absolute, the top seller, saw its retail sales amount decrease by 28% from 3.22 billion won in the first half of 2023 to 240 million won in the first half of 2024.
This figure is based on sales collected by aT from retail stores including large supermarkets, chain convenience stores, etc. While the absolute figure is low due to the exclusion of e-commerce sales, it is suitable for understanding changes in consumer trends.
The retail sales amount of Il Dong Hudis' goat milk formula also decreased by 27% from 2.09 billion won to 1.54 billion won during the same period. The sales of Namyang Dairy Products' formula brands Imperial and IM Mother fell by 24% and 17%, respectively, during the same period. LOTTE Wellfood's dairy brand Pasteur also saw its retail milk sales drop by 19% from 2.402 billion won to 1.95 billion won.
◇ 'Twice as expensive' imported formula sells well
On the contrary, during this period, imported formulas continued to grow. The retail sales of Aptamil, made by France's Danone and popular worldwide, increased by 11% from 85.4 billion won in the first half of 2023 to 94.6 billion won in the first half of 2024. According to Euromonitor data, Aptamil holds a market share of 35% in Germany, 32% in the UK, and 28% in France.
Aptamil officially entered the domestic market in 2017. According to market research agency Nielsen, Aptamil secured a market share of 21% in the domestic formula market in the second quarter of 2022, just five years after entering the market, taking the top position from Maeil Dairies.
Aptamil's high-end product, Profutura Duo Advance, costs 45,000 won per 800-gram can in the domestic market, which is double the price of domestic products with the same capacity. Aptamil has raised its price twice in the last six months, but its popularity has not waned.
Looking at the Customs Service's import and export statistics, the preference for imported formula is evident. Last year, the import volume of powdered milk reached 4,912 tons, setting a record high. While the total fertility rate (the number of births expected per woman over her lifetime) reached an all-time low, the demand for imported formula recorded the highest ever. By country, Germany (2,040 tons), New Zealand (1,306 tons), Ireland (417 tons), and France (380 tons) followed, with a large amount of Aptamil being imported from Germany.
The import value also grew by about 10% annually, recording 96.76 million dollars (approximately 140 billion won) last year, up from 83.17 million dollars in 2020.
The American formula Similac, which gained popularity in Korea in the early 2010s, lost its appeal in 2022 when two infants in the U.S. died from bacterial infections after consuming the product.
◇ Seeking new markets for K-formula... heading to Asia
According to industry insiders, imported formulas have gained popularity through online platforms and word of mouth. Actively reviewing products through parenting communities and sharing information through overseas direct purchases have led to the establishment and growth of imported brands.
A representative from the Korean Dairy Products Association noted, “Although the population structure has changed and the number of newborns has decreased, spending on children has not decreased. As foreign brands like Aptamil invest in research and development, the level of breast milk component research is high, creating a strong atmosphere where parents are willing to buy foreign formula even through direct purchases.”
The dairy industry has already prepared for the situation of reduced formula sales due to aging population and declining birth rates over the past decade. Domestic corporations have reduced their reliance on the formula business and diversified their operations.
Maeil Dairies has expanded its business areas into protein supplements Selects, bakery brand Mido, and patient and senior-friendly foods. Il Dong Hudis saw its formula business share decrease from 78% in 2020 to 53% in 2021. Il Dong Hudis is targeting the adult nutrition market with its health functional food brand Highmune.
Attempts are also ongoing to export formula to countries with high birth rates. According to the Korea Agro-Fisheries & Food Trade Corporation's agricultural and food export information, the export amount of formula to the 10 ASEAN (Association of Southeast Asian Nations) countries reached a record high of 30.7 million dollars (approximately 44.2 billion won) last year, up from 10.5 million dollars in 2014, nearly tripling in a decade.
Namyang Dairy Products is performing strongly in Cambodia. Among the formula exported to Cambodia, the largest formula exporting country in ASEAN, 80-90% is known to be Namyang Dairy Products' products. LOTTE Wellfood is strengthening its brand in the Vietnam market with its locally specialized product Newborn.
A representative from the Milk Promotion Agency stated, “Just as Korean consumers prefer European formula, Southeast Asian consumers like Korean formula. However, since formula is a product subject to high tariffs in some countries, diversification of markets is necessary.”