Nestle has confirmed its Wyeth Nutrition arm will cut prices on infant formula sold in China as local authorities investigate foreign companies, including the world’s largest food maker.
Wyeth will lower prices from 8 July “through 2014” on “key products”, Nestle confirmed to just-food today (3 July). On average, prices will fall by 11%; Nestle said the largest cut will be of 20%.
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Nestle said Wyeth had been “actively co-operating” with China’s National Development and Reform Commission in the probe into what the Swiss food giant called “infant formula manufacturers’ pricing practices”.
Nestle said: “Following this investigation, Wyeth Nutrition assessed its pricing practices and decided to improve certain sales and marketing practices. Wyeth Nutrition also decided not to raise prices of any new products over the next year.”
The investigation was first revealed by Hong Kong-listed Biostime International Holdings, when it admitted it was under investigation.
“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,” Biostime said.
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By GlobalDataDanone, Mead Johnson, FrieslandCampina and Abbott Laboratories are also being investigated.
Article 14 of China’s anti-monopoly regulations 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.
In a statement issued yesterday, Mead Johnson, which manufacturers the Enfamil brand, said it was “fully cooperating with the recently reported Chinese government antitrust review of resale prices in the infant formula market”.
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.
