Near-term sentiment in the infant formula industry remains cautious, while leading brands with strong quality control and brand equity may still gain share

Overview

This report focuses on recent product-safety and public-opinion incidents in China's infant formula industry, using Baidu Index, Nielsen offline share, Douyin 618 sales rankings, and company announcements to track consumer sentiment, brand share, and operating pressure. Key events include Cabio issuing an earnings warning and triggering an ST risk warning following the Nestlé ARA-related recall, as well as the recall and retesting dispute sparked after a batch of Hong Kong-version FrisoLac products was flagged in Macau for excessive lead content.

Core views

Goldman Sachs's core view is that recent incidents will reinforce cautious near-term sentiment in the infant formula industry, with both online and offline sales already under pressure. In addition to weak underlying demand, the industry faces further challenges from supply chains, regulation, product quality, and channel adjustments. However, the report also emphasizes that these incidents are primarily company- or brand-level disruptions rather than systemic product-safety crises; leading brands with strong quality control and brand equity are more likely to gain share amid cyclical pressure.

Analysis framework

The report assesses industry impact by combining incident tracking with sentiment data. It reviews company announcements and regulatory information from Cabio, FrieslandCampina, Ausnutria, and others, uses Baidu search indices to assess peaks and the cooling pace of consumer attention, and combines Nielsen data, Douyin 618 sales rankings, and online sales growth to observe changes in brand share.

Methodology notes

• Consumer sentiment trackingBaidu Index incident-interest tracking

  Use search indices to measure public attention to infant formula product-safety incidents and the pace at which attention cools.

  The report compares Baidu search interest in the Friso lead incident and the Nestlé IMF recall, concluding that interest in the Friso incident briefly peaked on July 27 and remained far below that of the Nestlé recall.

• Channel and share trackingNielsen offline share and Douyin 618 sales rankings

  Use offline market share and e-commerce promotional rankings to observe the brand competitive landscape.

  The report notes that FrieslandCampina increased its offline infant formula market share in January-April 2026 and improved its ranking during the recent Douyin 618 shopping festival.

• Fundamental event analysisInterpretation of company announcements and earnings warnings

  Assess operating pressure through company announcements, regulatory notices, and earnings warnings.

  The report reviews the 1H26 earnings warnings from Cabio and Ausnutria and distinguishes one-off inventory adjustments, asset impairments, and changes in core operating profit.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China infant formula industry

  Core covered industry

  Strengths

  Leading brands have advantages in quality control, brand awareness, and channel resources, while some specialized segments still have room for growth.

  Weaknesses

  Underlying demand is soft, both online and offline sales are under pressure, and price competition is intense in standard cow's-milk infant formula.

  Comparison

  Search interest in the Friso incident is below that of the Nestlé recall, suggesting that the impact is currently smaller; strong brands such as Bellamy and Biostime are growing significantly faster than the industry.

  Risks

  Product-quality incidents, tighter regulation, supply-chain disruptions, channel inventory adjustments, and declining consumer confidence.

• Cabio

  Non-covered company affected by the Nestlé ARA incident

  Strengths

  Advancing non-ARA businesses, animal nutrition algal oil DHA, international cosmetics partnerships, and HMO commercialization.

  Weaknesses

  Overseas public opinion and new regulatory requirements have severely disrupted production and sales, creating uncertainty around a near-term return to normal operations.

  Comparison

  Compared with leading brands, Cabio is more directly exposed to the impact of raw-material and regulatory incidents.

  Risks

  ST risk warning, 1H26 net loss, slower-than-expected recovery of core customers, and changes in global regulatory standards.

• FrieslandCampina / Friso

  Brand owner affected by the elevated lead content incident

  Strengths

  The company stated that lead was not detected in officially imported batches in mainland China before market launch; offline share and Douyin 618 ranking had previously improved.

  Weaknesses

  The Macau recall may weigh on brand trust and consumer sentiment in the short term.

  Comparison

  Baidu Index data shows that interest in the Friso incident has briefly peaked and remains below that of the Nestlé recall.

  Risks

  Subsequent testing results, regulatory updates from Macau and mainland China, and the impact on cross-border e-commerce or parallel-import batches.

• Ausnutria

  Industry-related non-covered company

  Strengths

  After excluding one-off and non-cash impacts, 1H26 core operating net profit was roughly stable year on year; the company is reducing supply-chain inventory and optimizing SKUs.

  Weaknesses

  1H26 revenue is expected to decline approximately 20% year on year, with net profit turning into a loss.

  Comparison

  Specialized goat milk formula segments such as Kabrita continue to show solid international growth in North America and the Middle East.

  Risks

  Inventory adjustments, asset impairments, external environmental pressure, and the pace of channel destocking.

Key data

• Cabio 1H26 expected net profitApproximately -RMB101 millionThe company stated that overseas public opinion and new regulatory requirements severely disrupted production and sales, triggering an ST risk warning from the Shanghai Stock Exchange.
• FrisoLac Macau regulatory lead limit0.02mg/kgThe Macao government issued a food-safety warning and requested a recall of a batch of Hong Kong-version FrisoLac Stage 1 products.
• FrieslandCampina third-party retesting result<0.007mg/kgThe company stated that retesting by an independent third-party laboratory for the same batch showed levels below the Macau regulatory limit.
• Lead testing of officially imported Friso products in mainland ChinaNot detected, <0.01mg/kgThe company stated that lead was not detected in pre-market quality testing of all officially imported Friso batches in mainland China, below China's 0.08mg/kg limit.
• Online infant formula market sales change-17% YoY in 2Q26, -11% YoY in 1Q26Used to support the view that near-term industry demand and sentiment are weak.
• Offline infant formula market changeDown 8% in January-April 2026Shows that offline channels are also under pressure.
• Bellamy and Biostime online infant formula sales in June 2026+70%/+43% YoYGoldman Sachs described both as key market share gainers.
• Ausnutria 1H26 revenue guidanceRMB3.07-3.17 billion, midpoint of approximately RMB3.12 billion, down approximately 20% YoYThe company issued an earnings warning on July 24.
• Ausnutria 1H26 net loss guidance-RMB685 million to -RMB785 millionCompared with 1H25 net profit of RMB181 million.
• Ausnutria 1H26 core operating net profitRMB155-255 million, midpoint of approximately RMB205 millionRoughly stable year on year after excluding one-off inventory adjustments, non-cash asset impairments, and related impacts.

Impact & implications

In the short term, product-safety and regulatory incidents may continue to weigh on consumer confidence, channel replenishment willingness, and investor risk appetite in the infant formula industry. In the medium term, industry divergence may intensify, with companies that have stronger quality control, higher brand credibility, and healthier channel inventories better positioned to gain share. Price competition is intense in standard cow's-milk infant formula, while segments such as goat milk formula, specialized nutrition, probiotics, DHA, and HMOs may continue to offer structural growth opportunities.

Risks

• Subsequent testing or regulatory announcements may change the scope and duration of the Friso incident's impact.
• Declining consumer trust in infant formula safety may suppress short-term sales and willingness to switch brands.
• Channel inventory adjustments and price competition may continue to weigh on industry revenue and margins.
• Company-level earnings warnings, ST risks, or asset impairments may further reduce investor risk appetite.
• Cross-border e-commerce and parallel-import batches may create uncertainty in regulatory communication and consumer perceptions.

What to watch

• Subsequent testing results or announcements from FrieslandCampina, Macau authorities, and mainland Chinese regulators regarding the FrisoLac batches.
• Whether Baidu Index search interest in the Friso lead incident continues to cool or rises again following new announcements.
• Online and offline infant formula sales growth, as well as changes in the shares of Bellamy, Biostime, FrieslandCampina, Danone, A2, Wyeth, and other brands.
• Progress in Cabio's recovery of core customers, non-ARA business, diversified orders, and HMO commercialization.
• Whether Ausnutria's inventory reduction, SKU optimization, and stable core operating profit can continue.