Foreign milk firms cut prices after probe announced

Milk powder maker Beingmate and Wyeth announced to cut price of products in China immediately after the country’s top economic planner announced an investigation for alleged price manipulation of five foreign infant milk firms on Tuesday.

Wang Huiying, PR manager of Dumex - one of the five companies involved in the price-fixing and monopoly probe, told People’s Daily Online that Dumex is actively coordinating with Chinese agency's investigation and will adjust price later.

The probe launched by China’s National Development and Reform Commission (NDRC) covers high-end milk powder products of foreign brands and domestic products that used imported milk.

The investigation is based on beliefs that the involved companies are holding an unusually large share of the Chinese market via high prices and limited market competition.

A Nielsen report said that the size of Chinese milk powder market was about 38.5 billion yuan in 2012, among which 42.7 percent was contributed by Beingmate, Wyeth and Dumex. The report also showed that last year foreign brands hold 52.1 percent of baby formula market in China.

Chinese consumers’ distrust in homegrown dairy helped push prices of imported milk powder higher and higher. As result, the prices of the investigated products have increased by 30 percent since 2008.

Foreign milk powder makers like playing marketing gimmick to raise price in Chinese market. Updated formula and new package are the most common reason for price increase.

“The companies claimed that they took Chinese dietary habit and body constitution into consideration and added zinc or iron to the Chinese formula. But in fact the additional cost of doing so is negligible. Compared to the markup, new package is much cheap,” said a Chinese employee with a foreign milk power firm.

Price manipulation is not the only problem

The package of some foreign milk powder can hardly tell exactly where the milk is from or where it is produced. Chinese consumers are informed that it is imported or the milk source is foreign. Legal experts said this harmed Chinese consumers’ right to know.

For example, Dumex indicates that the raw milk it used in infant formula is 100 percent imported but doesn't show the country of origin or the proportion of imported ingredient.

Dumex consumer service said the milk is all from Australia and admitted that consumers are unable to know this from the package.

“In China, the imported milk powder has two implications. It may suggest that the product's ingredient and package are completed outside China. It could also suggest that Chinese companies buy milk from foreign countries and then process and pack it in China,” Wang Guangwen, deputy secretary general of Shanghai Dairy Association told People’s Daily Online.

According to insiders, most of the so-called “imported” milk powder products are produced using imported whey powder. The producers just add some nutrients to it in factories in China.

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