Mead Johnson to expand US infant formula capacity to meet online Chinese demand
Speaking at the Consumer Analyst Group New York (CAGNY) conference this week, Kasper Jakobsen, president and CEO, Mead Johnson, said the company is "adding capacity" to its two US facilities "as it begins to see the e-commerce channel between the US and China open up."
Such investment, Jakobsen said, is key to ensure it can provide the "flexibility" demanded by Chinese consumers.
"Flexibility is really what the future's going to be about in China," said Jakobsen.
"We are building flexibility to address multiple consumer preferences by expanding our portfolio, by offering a wider array of products from difference source points to the Chinese consumer," he said.
Mead Johnson is "enabling them by investing in capacity," said Jakobsen.
In September 2014, it unveiled its single largest capital investment - a US$325m plant in Singapore.
It now plans to build on its Singaporean investment, by expanding the capacity of plants in the Netherlands and the US.
"Proliferation of new sales channels"
The Chinese infant formula market has, according to Jakobsen, evolved significantly in recent years, driven largely by the "proliferation of new sales channels."
"Most dramatic has been the emergence of e-commerce within China," said Jakobsen.
"We are seeing that's it's becoming increasingly about business to consumer as opposed to consumer to consumer, and we believe that trend will continue in the years to come."
"We've also seen that the consumer has increasingly migrated towards imported products and away from locally produced products. So the channels that specialise or are more boas toward the sale of imported products have done relatively better."
In response, Mead Johnson last year opened its own store on TMall, the Alibaba-hosted virtual mall, and recently joined Chinese social network, WeChat, where it currently has more than 500,000 followers.
Breastfeeding rates
Mead Johnson reported global sales of around US$4.4bn for 2014, up around 5% on the US$4.2bn recorded in 2013.
While China played a part, Mead Johnson's performance in the US was the "highlight" of 2014.
At the close of the year, it controlled nearly 40% of the US$4bn US infant nutrition market, said Jakobsen.
He attributed the company's Stateside performance to three factors - an increase in US births, the emergence of the toddler segment, and its "very lean" operations.
Climbing breastfeeding rates are, however, a concern for the company, he said.
"...we continued to see breastfeeding rates in the US climb through 2014," said Jakobsen. "Now, we'll be watching very closely as we go through 2015 to see whether the improvement in unemployment will cause this trend to abate somewhat."
"It is our hope and expectation that will be the case, but through 2014 it remained on the rise."
