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Why is foreign milk powder so expensive in China? (3)

By Zhou Rui, Yao Yujie, and Luo Zhengguang (People's Daily)

16:50, May 28, 2012

According to a staff at a foreign milk powder company, it is a kind of marketing strategy, namely introducing the so-called "high-end" and "ultra high-end" high-priced milk powder. Despite that many brands of foreign milk powder are advertised as being added such ingredients as zinc and iron in accordance with Chinese people's eating habits and physical quality, the cost of these added ingredients is actually very little. The high price mainly comes from the marketing strategy and packaging.

Domestic milk powder enterprises need to improve themselves and change the status quo.

A person who has engaged in the infant formula milk powder industry for many years said that the current milk powder market of China can be described as a "deformed market." Consumers are forced to "worship" foreign milk powder, which led to an excessive price. If one brand rises in price, other brands will inevitably choose to follow; otherwise consumers will feel that your product is low quality.

According to analyses by experts, the fact that a series of quality problems of the domestic-made milk powder frequently occurred in recent years has objectively strengthened Chinese consumers' mentality of “buying the expensive, but not the suitable.” Foreign milk powder manufacturers and distributors seized this mentality and adopted a market strategy of “raising the price several times in a year.” In this way, they have earned huge profits from Chinese consumers.

According to statistics offered by the Oriental Agricultural Consulting Center, since the “melamine incident” occurred in 2008, the price of foreign milk power has been raised several times and each growth rate of the price was about 10 percent on average. Compared to 2008, the price of a can of foreign milk powder has increased by between 50 and 100 yuan.

The “Report of Investment Analysis and Forecast on China's Milk Powder Market 2009 – 2010” issued by the China Investment Consulting Company shows that foreign-brand milk power's share in the high-end market of China has increased from 70 percent of the beginning of 2008 to 82 percent.

In order to end foreign milk powder's monopoly in the market of China, Chinese enterprises must focus on improving themselves. Insiders, including the standing director of the Dairy Association of China Chen Sanyou, suggest that Chinese dairy product enterprises should concentrate on rebuilding the confidence system instead of decorating the concept and pretending to be foreign brands to earn huge profits. They must strengthen their competitiveness in the high-end market and foster their customers' loyalty and trust.

Read the Chinese version at: “洋奶粉”凭什么贵上了3倍

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