April 20, 2012

High profit pushes up China's imported milk powder prices

Since 2008, imported milk powder to China has risen in price four times at an average rate of 10% when Sanlu, a Chinese dairy firm, was revealed to be selling melamine-tainted milk powder, Economic Information reported Monday (Apr 16).

The report was based on figures published by Beijing Orient Agribusiness Consultant, a professional agriculture and food consulting firm.

Currently, the price of a tin of foreign milk powder has grown to between 200 and RMB400 (US$63), said the report.

But at Shanghai Customs in January, a kilogramme of imported milk powder was only levied a tariff of RMB32 (US$5). Even with packaging, transport and sales factored in, the cost for a tin of 900-gram milk powder sold in China still falls short of RMB100 (US$15.85).

The milk powder produced in Australia and New Zealand is three times as expensive in China as in their own countries, some milk powder buyers said.

MeadJohnson, a US-based milk powder producer, has found its gross margin at a stable rate of 63% since 2009 while French Biostime said its gross profit topped 70% in the 2011 annual.

Industry insiders say the gross profit margin has remained at more than 50% for almost all imported milk powder brands in China.

Foreign milk powder started to march into China when the boiling milk powder scandal undermined the credibility of native milk powder producers in 2008, said Zhang Weiyin, general secretary of Heilongjiang Dairy Association.

They have been beating domestic milk powder brands on the strength of constant influx and circulation of profit since then, he added.