Foreign Baby Formula, Prices Keep Going Up
    2012-07-09 10:00:27         Web Editor: Mao Yaqing

The price of foreign milk powder brands have increased recently here in China.
The prices for the imports are several times higher than domestic brands.

Canned milk powder prices now exceed 400 yuan.
But does a high price necessarily mean high quality?

Zhang Wan finds out.


Using a German organic powdered milk product as an example, its listed online price is only 9.95 euros, about 80 yuan. But, that is only a quarter of its retail price in China.

Many milk powder consumers complain that the milk powder produced in Australia and New Zealand is three times more expensive in China than in their own countries.

Many parents say they have no choice. Ms. Zheng is one of them.

"Well, I think we need to pay at least 2,000 yuan a month for my baby's milk powder. Most of our family income is spent on my baby, and milk powder costs a lot every month."

As for the reason behind the price hikes, many foreign brands say it is because of higher costs and product upgrades. However, Zhao Ping, the department head of the Chinese Academy of International Trade and Economic Cooperation, disagrees.

"Every time there is price increase for foreign milk powder, the reason is said to be higher costs. But, this isn't a rational explanation for frequent price increases, such as price hikes several times a year."

Experts say that the extra cost for the imported milk powder mainly comes from import duties, inspection fees, and warehouse costs, which account for 28 to 30 percent of the original price. That does't give excuse of three times hike on original prices.

So the real reason for the frequent price hikes, experts believe, is a foreign milk powder monopoly in the Chinese market.

"The monopoly doesn't mean that any particular foreign brand has very large market share, but several brands together take up more than 60 percent of the baby formula market in China."

Also, there is another reason for the price hikes. Chinese consumers believe that the high price correlates with high quality, especially when home brands repeatedly have quality problems.

A baby boom in the current Year of the Dragon in the Chinese zodiac has led to an increase in imported formula. It is a vast market for foreign brands.
Facing the rising prices for foreign milk powder, Zhao Ping says the only way out is to cultivate competitive domestic brands.

"The prices for foreign milk powder are decided by the companies, and the government can not restrict the price. Therefore, it's more important is to have competitive domestic brands and encourage domestic milk powder manufacturers to pay more attention to brands image and increasing the quality of their products. This will build a better image among domestic consumers."

The tons of milk powder entering China every day meet the needs of tens of millions of babies. Industry insiders say overseas products, especially those from New Zealand due to China's Zero Tariff policy on infant milk from that country since the beginning of this year, have posed a great challenge to China's domestic brands.

For CRI, I am Zhang Wan.


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