Parent Preferences for Baby Formula in China and Potential Implications for U.S. Dairy Product Exports

As the world’s most populous country, with more than 16 million births every year, China has emerged as a large importer of baby formula. China’s relaxation of the one-child policy, which was announced in 2015, is expected to increase the number of births significantly and therefore increase the demand for Chinese and imported baby formula. While information on parent preferences for baby formula is very important for understanding and predicting China’s import demand for baby formula and other products used to produce baby formula, like milk powder, there are very limited empirical studies on Chinese parent preferences for baby formula in the literature due to data limitation and other reasons. This research collects primary data from China through a parent survey, uses the data to analyze parent preferences and willingness to pay (WTP) for selected baby formula attributes, and derives implications for U.S. dairy product exports. Specifically, with detailed data from a total of 433 respondents, this study first examines parent purchase behavior of baby formula through descriptive analysis, then assesses parent preferences and WTP for selected baby formula attributes through the estimation of a random utility model, and finally derives implications for U.S. exports of milk powder, whey, and other dairy products. The descriptive analysis suggests that education level and income play an important role in parent purchase behavior of baby formula. The estimation results of the random utility model differed according to whether the survey was administered online or as a hardcopy. The results from the online survey indicate that imported, organic, and more reputable brands of baby formula are more attractive to respondents than domestic, non-organic, and less reputable brands. While respondents who completed the hardcopy survey also indicated a preference for organic baby formula from a reputable brand, they preferred domestic baby formula to imported formula. Further analysis of the WTP from the online survey for baby formula showed that parents have a strong preference and are willing to pay significantly more for baby formulas produced in Australia and the U.S. as compared to that produced in China. They are willing to pay more for organic baby formula and baby formula with an excellent reputation. The WTP results from the hardcopy survey indicate that parents are willing to pay more for domestic baby formula. They are also willing to pay more for organic baby formula and baby formula with an excellent reputation. China’s emerging demand for imported baby formula, milk powder, and whey may bring more opportunities for the U.S. dairy industry, but U.S. dairy products are also facing increasing competition from similar products from other nations in the Chinese market. More studies are needed to identify the comparative advantages of U.S. baby formula and other dairy products in the Chinese market and to develop effective trade policies for enhancing U.S. exports to China.