UK infant formula firm seals US$118m China deal and eyes other Asian markets

21-Feb-2018 - Last updated on 21-Feb-2018 at 00:48 GMT

The formula comes in 800g and 900g tins for three life stages, covering a child's first three years of life.

UK firm Kendal Nutricare has signed a US$118m five-year contract deal with import / export company Orient International Holding Shanghai Foreign Trading Co. to distribute its organic infant formula in China.

CEO Ross McMahon told NutraIngredients-Asia: "We have signed an exclusive master distribution agreement with Orient International Holding Shanghai Foreign Trading Co. that extends to 2025, and they expect sales to grow each year by more than 20%."

Sold under the brand name Kendamil, the formula comes in 800g and 900g tins for three life stages: First Infant Milk for newborns and infants up to six months old, Follow On Milk for infants aged six to twelve months, and Toddler Milk, for children aged one to three.

Each 900g tin of the formula retails for around $14, with McMahon saying this was significantly cheaper than other overseas infant formula types, which can cost upwards of $30 per tin.

Testing the waters

The range is available in 8,000 stores across tier 3 and 4 cities in China. McMahon said, "We're rather young company, and retailers in tier 1 and 2 cities tend to favour the major MNCs.

"If you don't have a proven track record, you'll have to pay more fees to get your products stocked, because retailers don't have the assurance they will sell well and need some form of security."

However, he added that Kendal intends to increase the number of stores where the products are stocked to 10,000 later this year, including those in tier 1 and 2 cities.

Regarding the decision to make the range an organic one, he said: "Consumers in both China and the UK want to feed their babies organic food, and the future trends for organic baby powder are very strong."

'Delighted' at approval

Kendal Nutricare first started exporting to China in 2016, after it secured a £6m contract for its infant formula.

It launched Kendamil Organic Formula in July last year, and the CFDA approved it for sale under the previous infant formula rules in November.

Now, under the country's newly implemented and more stringent rules, the range has once again been approved for sale; McMahon said he was 'delighted' at this approval, as it would mean smooth sailing for Kendal's exports to China.

Another advantage of this development is the additional employment it will create: the company expects to hire 25 more staff at its headquarters in Cumbria, England, and 125 more at its production site.

Currently, Kendal has 125 employees in the UK.

McMahon said: "(The product) will always be made at Kendal's facility in the Lake District, and exported to other countries."

Bracing for Brexit

This comes just after McMahon's recent trip to China, taken alongside UK prime minister Theresa May.

The PM is keen on strengthening trade between China and the UK, and was there to discuss new business opportunities for both countries, presently and after Brexit.

Beijing, Shanghai and Wuhan were the three main stops during her visit, and Kendal Nutricare was one of the 50 businesses spanning several sectors that sent company representatives on the trip.

With regards to the company's export plans outside of China, McMahon said, "We are exporting to Vietnam, but we are looking for distributors for Indonesia, the Philippines, Thailand, Malaysia and Singapore."

Kendamil recorded total sales of £9m in the year ending March 2017, and £14m in the year ending March 2018.

We recently reported about China's new infant formula rules finally taking effect, giving manufacturers a clearer idea of what to expect.

Companies whose formulas have already been approved are hoping the enforcement of the new rules will help to stabilise the market.