July 12, 2011

Imported formula milk prices in China on the rise

The price of imported infant formula milk continues to surge, putting pressure on families.

In the past two week, the price of a 900 gram container of ABT Formula I milk powder in Beijing has risen to RMB261 (US$40) from RMB236 (US$36). The increase of almost 10% was followed by price hikes for the company's Formula II and III milk.

Meanwhile, prices of newly packaged Wyeth Gold infant formula milk and Nestle formula milk powder have also risen by 10% each.

Although the price of imported formula milk has continued to rise, a large number of Chinese consumers are unwilling to accept homemade milk powders because of safety concerns.

In 2008, six infants died and 860 babies were hospitalised with kidney stones and other renal damage after ingesting milk and infant formulas that contained the toxic chemical melamine.

In a separate incident four years before, a batch of watered-down milk resulted in the deaths of 13 infants from malnutrition. Meanwhile, in July last year, the authorities reported the seizure of dairy products contaminated with melamine.

In the wake of these scandals, many mainlanders have opted to purchase imported dairy products, or have even travelled to Hong Kong to buy large quantities of imported dairy products. The high demand has resulted in a local shortage of formula milk.

Data from China's General Administration of Customs show that the country imported 268,500 tonnes of milk powder in the first five months of the year, an increase of 49% on-year. Full-year imports may reach 500,000 tonnes.

The rise in the price of imported formula milk came just two months after the National Development and Reform Commission, China's economic planning body, held talks about price increases with six foreign milk powder manufacturers, including Nestle SA, Ausnutria Dairy Corp and Wyeth, a unit of Pfizer Inc.

The talks were part of China's attempts to cool inflation, which has been the government's top priority this year.