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SPX Benefitting from Increased Global Demand for Powdered Infant Formula

Marc Michael, SPX Food and Beverage President

According to the United Nations, the world’s current population of 7.2 billion is projected to increase by one billion over the next 12 years and reach 9.6 billion by 2050. The world’s constantly expanding population is, in turn, helping to drive global demand for infant milk formula. In fact, the global infant milk formula market is reportedly projected to double to $25 billion by the year 2017.

Demand for infant milk powder is particularly strong in China, as well as the broader Asia Pacific region – and this continues to draw the attention of milk producers across the globe. SPX Food and Beverage President Marc Michael explains.

How large is the milk powders market in China?

China’s infant milk formula market is valued at approximately $12.4 billion market and is currently the world’s largest.

From where is China getting most of its milk powders today?

Since 2008, China has been importing more and more milk powder from abroad. Today, reports show that milk producers in New Zealand are supplying approximately 80-90% of China’s milk powders. However, according to recent news reports, China buyers are beginning to look for alternate sources beyond New Zealand, such as milk powders from Europe and the U.S. This is due in part to a drought in early 2013 that limited New Zealand’s overall milk powder production, combined with growing concerns about an over-reliance on one source of milk.

How is this trend impacting the global food and beverage industry?

Well, in many ways global demand is outpacing supply. For example, in 2013, there were reports that Chinese citizens traveling abroad in the U.K., Netherlands and elsewhere were buying up so much formula to take home that they were emptying store shelves and contributing to shortages in those countries.

High demand in the Asia-Pacific region – particularly in China and Hong Kong is actually benefitting Europe and other areas of the world that are trying to help meet the demand. Producers in Argentina for example have started marketing their infant formula in China through local distributors.

How is growing global demand for infant milk powder impacting SPX’s business?

SPX is definitely benefitting from this trend as we have been seeing stepped-up demand for our dairy processing expertise and our proven track record of designing and establishing powdered infant formula plants.

For example, at the end of 2013 we were awarded more than $50 million from Synutra France International, a subsidiary of Synutra International Inc., one of the leading infant nutrition companies producing and supplying in China. The contract is to establish a powdered infant formula processing plant utilizing SPX process systems to convert milk and other ingredients into high quality powdered infant formula and other whey protein powdered products for export to China.

This order comes on the heels of another $40 million contract we announced in July of 2013 from a leading global infant nutrition company to supply a powdered infant formula processing plant in Germany. This plant will also utilize SPX process systems to convert milk and other ingredients into high quality powdered infant formula, primarily for export into emerging markets.