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July 2, 2013

CHINA: Beijing probes infant formula prices

China has launched an investigation into infant formula prices, a probe that takes in foreign industry giants including Nestle, Danone and FrieslandCampina.

By Dean Best

China has launched an investigation into infant formula prices, a probe that takes in foreign industry giants including Nestle, Danone and FrieslandCampina.

Beijing’s National Development and Reform Commission is analysing the activities of several infant formula companies operating in China. Reports from the country today (2 July) said Mead Johnson and Abbott Laboratories are also under investigation. 

Hong Kong-listed Biostime International Holdings has admitted it is under investigation. In a filing late last week, Biostime said: “The main purpose of the investigation is in relation to an alleged violation of Article 14 of Anti-Monopoly Law of the People’s Republic of China by Biostime Guangzhou in managing the market sales prices at which the distributors and retail sales organisations sell our products.”

Article 14 of the anti-monopoly regulation prohibits agreements among business operators and their trading parties relating to “fixing the price of commodities for resale to a third party”; “restricting the minimum price of commodities for resale to a third party”; or “other monopoly agreements” as determined by the Anti-monopoly Authority.

China’s infant formula market is booming, with demand for foreign-made products driving the sector after a series of safety scares involving domestic companies.

Projections from Chinese analysts Research in China suggest the market is expected to grow by “over 15%” into 2015, when the sector is expected to reach a total value of around CNY370bn (US$60.32bn).

The price of infant formula in China has come under the spotlight recently, with Chinese consumers shipping in products from overseas, prompting rationing in markets in Europe and in Australia.

Figures from Euromonitor claim the average unit price of infant formula in 2012 totalled US$24.60, compared to an average price of $20.40 in western Europe and $16.30 in the UK.

Nestle, Danone and FrieslandCampina this morning confirmed that they are in contact with the authorities on the matter, while Mead Johnson could not be reached for immediate comment.

Click here for just-food’s analysis of booming Chinese demand for foreign-made infant formula, or click here to access our insight into Beijing’s attempt to improve safety standards in domestic formula production. 

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