Chinese parents snap up pricey foreign milk powder

(Ecns.cn)--Foreign-branded milk powders won the hearts of many Chinese parents following the poisoned milk scandal of 2008, and their wariness has been stoked by a constant barrage of gloomy news about the country's food industry ever since, reveals Nan Feng Chuang magazine.

Many young mothers (especially those of the post-80's generation) have never fully regained confidence in the domestic industry and are turning to alternatives such as online shopping and purchasing agents to acquire baby food and other infant-care items from abroad.

Dai Wei, an IT engineer in Addington, a small town in New Zealand, often transforms into a purchasing agent after work. His main task is to buy as much milk powder as possible for six young mothers in China who eagerly await the product to feed their babies with.

Dai explains that "it's a business that benefits others as well as me." He has already opened a store on taobao.com, China's biggest e-commerce platform, where mothers can order New Zealand milk powder by paying a 10-15 percent service charge.

Nan Feng Chuang finds that many overseas Chinese, including housewives, students and businessmen, have plunged into the sourcing business for foreign-branded milk powder in the past three years. Some have even set up logistics companies focused exclusively on shipping products to China.

Statistics show that milk powder imports have witnessed dramatic increases since 2008, making China the world's largest milk powder market.

So many tons of milk powder entering China every day meets the needs of tens of millions of babies, but it also poses challenges to the country's domestic brands.

Ms. Guo, the mother of a six-month-old baby, says, "I won't take any chances with my baby's food. I will not consider any domestic brands. All my friends are also buying baby food from overseas, some from France through an agency, and some order directly from a U.S. online shopping site."

In response, the General Administration of Customs adjusted the tariff on imported milk powder in December. (The tariff for milk powder from New Zealand was reportedly raised from 5.8 percent to 10 percent.) In addition, a new rule was implemented on April 15 to place imported articles under stricter supervision.

As a result, foreign milk powder brands have started a new round of price hikes in recent months.

Mead Johnson from the United States and Nestle from Switzerland announced price increases in March. Meiji from Japan also raised its prices in April. The price for 900 grams of Meiji Cherished Child 1 formula increased by 15 percent, from 209 yuan to 239 yuan, reported the Shenzhen Economic Daily last Friday.

According to Shenzhen Vanguard, Nestle informed the supermarket earlier in April that prices of Nestle coffee, adult and baby milk powder would be raised. The largest increase would be on baby milk powder, with prices going up by about 10 percent.

In only a few years, the average price of imported milk powder has increased from 200 yuan to more than 300 yuan. Some foreign brands go for more than 400 yuan.

Milk industry experts told the Shenzhen Economic Daily that prices of imported milk powder on the Chinese mainland are the highest in the world, and twice as high as in Southeast Asia.

Yet despite the high prices, young mothers are still rushing to snap up what they believe is healthier food for their babies.

Ms. Hu, a Beijing resident, told Taiwan-based Central News Agency last year that since her baby was born she has shopped for foreign goods such as milk powder and skincare products.

"Although the final cost is higher than similar products in China, I feel comfortable with the quality of foreign products," Hu said.

However, Wang Dingmian, a senior specialist in China's dairy industry, told China Radio International (CRI) that "high prices and high profits are the two marketing philosophies for foreign milk powder manufacturers."

Wang noted that foreign manufacturers had a high-priced market position in China from the very start, even prior to the 2008 milk scandal. Foreign manufacturers continually strive for high profits, he added.

An anonymous insider added that for both Chinese and foreign manufacturers, the costs of raw materials used to make milk powder are almost the same. Even after adding fares and tariffs, the gross profit rate of products from abroad can reach margins of 80 to 100 percent compared to similar figures from Chinese manufacturers.