Newspaper article International Herald Tribune

Chinese Create Baby-Formula Shortage (in Australia)

Newspaper article International Herald Tribune

Chinese Create Baby-Formula Shortage (in Australia)

Article excerpt

A run on sales of infant formula is being attributed to Chinese visitors who, apparently concerned over domestic food safety standards, are believed to be buying in bulk.

A surge in the sales of one of Australia's most popular brands of infant formula has led to a bizarre sight for any wealthy, first- world nation: barren shelves in the baby aisle and even the rationing of baby food in some of the country's leading retail outlets.

But the run on sales is not the result of a local baby boom. Instead, it is being attributed to Chinese visitors who, apparently concerned over domestic food safety standards, are believed to be buying in bulk and carrying it home any way they can manage.

The run is one of the odder examples of how China's thirst for quality products can upend faraway consumer markets, particularly, in this case, amid concerns about the quality of the nation's food supply.

A number of recent high-profile scandals involving tainted food products in China have seriously shaken public confidence in the safety of domestic supplies. In 2009, two Chinese milk producers were executed for selling contaminated milk powder after infant formula and other milk products were found to have contained the industrial chemical melamine. Six children died and some 300,000 became ill in the scandal, which provoked a nationwide panic among parents.

Last June, China's biggest milk producer, the Inner Mongolia Yili Industrial Group, was compelled to recall six months' worth of production.

With an average annual birth rate of around 16 million, China is one of the world's largest markets for baby food and infant formula, representing around 23 percent of the $41 billion global market, according to a recent study published by Euromonitor International, a research firm in London.

Concerns about the safety of domestic supplies have led to a sharp rise in demand for imported formula from urban, middle-class households, sending prices of foreign brands soaring in Chinese supermarkets. According to the U.S. Department of Agriculture, the retail price of an 800-gram, or 28-ounce, package of imported formula sells for 290 to 350 renminbi, or $46 to $56, or about 50 percent higher than most domestic brands.

Hoping to stem the loss of market share to foreign competitors -- and perhaps to reap the higher margins on foreign milk -- some Chinese producers are even investing in plants overseas. One of China's leading baby formula makers, Synutra International, announced plans in September to invest EUR 100 million, or about $130 million, in a new milk-drying plant in the western French region of Brittany that will be operated by Sodiaal, a French dairy cooperative.

The plant, expected to open in 2015, would produce around 100,000 tons of "high-quality" whey and milk powder a year exclusively for Synutra, it said.

With Chinese visitors to Australia reaching record numbers in 2012, local merchants say it is common for these travelers to stock up on formula before leaving.

"This has been happening for maybe five years," Edward Karp, who owns Pyrmont Pharmacy in Sydney, said in an interview. "Their pilots and their flight attendants used to stay at the hotel in the other block, and they used to come in and buy cartons of baby formula to take back home for their family and friends. They used to come in in their uniforms with the trolleys, put the bags on the trolleys and off to the airport they'd go."

The phenomenon is not unique to Australia. Mainland Chinese visitors to Hong Kong, for example, have put such pressure on formula supplies there that retailers routinely limit purchases to four cans per customer, analysts say. …

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