Disruptions from infant formula incidents continue, and consumer sentiment remains cautious in the short term

Overview

This report tracks changes in consumer sentiment following events related to China’s infant formula industry, focusing on Cabio’s business update after the Nestlé IMF ARA recall incident, the controversy over lead levels in Friso products, Ausnutria’s profit warning, as well as industry channel and share changes. The core conclusion of the report is that these incidents are mainly company- or brand-specific cases rather than a systemic product safety shock, but they are sufficient to suppress consumer sentiment and investor confidence in the short term.

Core views

Goldman Sachs believes short-term sentiment in the infant formula industry has become more cautious. Online IMF sales fell 17% YoY in 2Q26 and 11% YoY in 1Q26, while the offline market declined 8% in January-April 2026, showing that demand and channel pressure remain. Although Baidu search interest in the Friso incident is below that of the Nestlé IMF recall and has already reached a phase peak, subsequent testing results and regulatory updates remain key variables. The report also believes that leading brands with strong quality control, brand strength, and channel execution are more likely to gain share in the current cycle.

Analysis framework

The report combines event tracking, company announcements, regulatory notices, Baidu search index data, Nielsen offline market share data, Douyin 618 sales rankings, and company profit warning information to assess consumer sentiment, industry sales pressure, and brand share changes.

Methodology notes

• consumer_sentiment_trackingBaidu Index event tracking

  Use Baidu Index to observe changes in consumer attention to infant formula-related events.

  By comparing search interest in the Friso lead-level incident with the Nestlé IMF ARA recall incident, the report assesses whether event attention has peaked and the relative strength of the impact.

• market_share_analysisNielsen offline market share

  Use Nielsen offline data to observe changes in value share among international IMF brands.

  The report mentions that Friesland, Danone, and A2 increased value share in March-April versus January-February, while Wyeth declined.

• ecommerce_sales_trackingDouyin 618 ranking

  Use Douyin 618 category rankings to observe online sales performance.

  The report notes that Friesland improved its Douyin ranking during the recent 618 shopping festival.

• disclosure_methodologyGS Factor Profile and M&A Rank

  Goldman Sachs’s disclosed framework for stock attributes and M&A probability.

  The disclosure section explains that GS Factor Profile compares stock attributes using growth, financial returns, valuation multiples, and composite metrics, while M&A Rank uses a 1-3 score to assess potential acquisition probability; this section is a general disclosure and does not constitute the core industry conclusion of this report.

Asset mapping & comparison

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

• Cabio

  Incident-related company, Not Covered

  Strengths

  The company proposed reconnecting with core customers, advancing non-ARA businesses, accelerating HMO industrialization, and establishing a full-chain product risk monitoring system.

  Weaknesses

  Production and sales were severely disrupted after the ARA incident; the company is expected to swing to a net loss in 1H26 and trigger an ST risk warning.

  Comparison

  Compared with infant formula leaders with strong brands and quality control, Cabio is currently more directly affected by supply-chain, public opinion, and regulatory events.

  Risks

  Uncertainty over the timing of normal operations recovery, customer attrition, tighter regulatory requirements, and insufficient implementation of the product risk monitoring system.

• FrieslandCampina / Friso

  Brand incident subject and market share observation target

  Strengths

  Retest results were below Macau’s limit, and lead testing for formally imported mainland China products showed non-detectable levels; Nielsen data shows offline IMF share increased in January-April 2026, and Douyin 618 rankings improved.

  Weaknesses

  A batch of the Hong Kong version of FrisoLac Stage 1 triggered a food safety alert and recall in Macau, disrupting brand trust in the short term.

  Comparison

  Baidu Index shows the Friso incident attracted less attention than the Nestlé IMF ARA recall incident.

  Risks

  If subsequent testing updates from Macau, mainland China, or the company are unfavorable, the public opinion cycle may be prolonged and affect cross-border and offline sales.

• Ausnutria

  Industry profit warning case, Not Covered

  Strengths

  After excluding one-off inventory and impairment impacts, 1H26 core operating net profit is expected to be roughly stable YoY; the company reduced channel inventory to below 30 days and cut total supply-chain inventory by 40%.

  Weaknesses

  1H26 revenue midpoint is down about 20% YoY, and the company is expected to turn from profit in 1H25 to a large net loss.

  Comparison

  Reflects industry channel adjustments and external environment pressure, consistent with the backdrop of intense price competition in standard cow’s milk IMF.

  Risks

  If SKU streamlining, inventory adjustment, and product mix optimization progress insufficiently, revenue and profit performance may continue to be affected.

• Bellamy and Biostime

  Key market share gainers mentioned by Goldman Sachs

  Strengths

  IMF online sales in June 2026 rose 70% and 43% YoY, respectively, showing strong share-gaining capability.

  Weaknesses

  They still operate within an industry environment of overall weak IMF demand and volatile consumer confidence.

  Comparison

  Compared with brands hit by incidents, the report believes companies with strong quality control and brand strength are more likely to outperform in the current cycle.

  Risks

  If industry sentiment deteriorates further or channel competition intensifies, growth momentum may be affected.

Key data

• Cabio 1H26 profit warningExpected 1H26 net loss of about RMB 101 millionThe company said overseas market sentiment and new regulatory requirements severely disrupted production and sales, and it expects normal operations to be difficult to restore within the next three months.
• Cabio trading statusTrading halted on July 27, 2026, and resumed on July 28 under the short name “ST Cabio”Triggered the Shanghai Stock Exchange’s ST risk warning standard for abnormal operations.
• Friso Macau testing incidentHong Kong version of FrisoLac Stage 1 IMF 800g, batch 1w07KPJ, was found by Macau to exceed the 0.02mg/kg lead limitMacau required a recall of the affected batch, and Hong Kong’s Centre for Food Safety advised consumers not to use the product.
• FrieslandCampina retest responseIndependent third-party laboratory retest result for the same batch was <0.007mg/kgThe company said this was below Macau’s regulatory limit, and that lead testing of formally imported Friso products sold in mainland China showed non-detectable levels of <0.01mg/kg, below China’s 0.08mg/kg limit.
• Ausnutria 1H26 revenue guidanceRMB 3.07 billion-3.17 billion, midpoint about RMB 3.12 billion, down about 20% YoYThe company issued a profit warning on July 24.
• Ausnutria 1H26 net loss guidanceNet loss of RMB 685 million-785 millionCompared with 1H25 net profit of RMB 181 million; excluding one-off inventory-related adjustments, non-cash asset impairment, and other impacts, core operating net profit is expected to be RMB 155 million-255 million.
• Industry online salesIMF online sales fell 17% YoY in 2Q26 and 11% YoY in 1Q26Used to support the view that industry demand and sentiment remain under pressure.
• Industry offline salesOffline sales fell 8% in January-April 2026Shows that offline channels are also under pressure.
• Share gainersBellamy and Biostime IMF online sales in June 2026 rose 70% and 43% YoY, respectivelyThe report says both remain key market share gainers.
• Baidu Index observationSearch interest in the Friso incident reached a phase peak on July 27 and was below that of the Nestlé IMF recall incident in absolute termsThe Nestlé IMF ARA recall incident cooled off about 20 days after media coverage.

Impact & implications

In the short term, food safety and regulatory incidents increase consumer sensitivity to infant formula quality, dragging on brand trust and investor risk appetite; in the medium term, the incidents may accelerate industry share concentration toward leading players with strong quality control, strong brand power, and more robust channel inventory management. Price competition in standard cow’s milk infant formula remains intense, while niche areas such as goat milk formula, professional nutrition, probiotics, HMO, and algal DHA oil may become key directions for companies to diversify risk and seek growth.

Risks

• Supply-chain risks and product quality issues trigger heightened regulatory scrutiny.
• Food safety-related public opinion drags on consumer trust and investor confidence.
• Underlying infant formula demand remains weak, with both online and offline sales under pressure.
• Channel inventory adjustments, SKU optimization, and price competition may continue to weigh on revenue and profit.
• If subsequent testing results or regulatory announcements are unfavorable, the Friso incident could regain attention.

What to watch

• Further testing results or updates from FrieslandCampina, Macau authorities, and mainland China regulators regarding the Friso incident.
• Whether the Baidu Index for the Friso incident continues to decline after the phase peak.
• Cabio’s progress over the next three months in restoring production and sales, addressing ST risk, and rebuilding customers.
• The execution effectiveness of Ausnutria’s channel inventory reduction, SKU streamlining, and product mix optimization.
• Subsequent changes in online and offline share for brands such as Bellamy, Biostime, Friesland, Danone, A2, and Wyeth.
• Whether niche categories such as goat milk formula, HMO, professional nutrition, probiotics, and algal DHA can offset price competition pressure in standard cow’s milk IMF.