Milk powder prices cut

More milk powder producers announced price reductions Monday, the latest in a series of price cuts following an investigation into price manipulation by China's top economic regulator.

Donane's Dumex announced Monday that it plans to reduce the sales prices of its main products by 5 to 20 percent starting from Tuesday.

The company promised to maintain the reduced prices over the next year, Dumex said in an e-mail sent to the Global Times Monday.

Domestic producer Z­­­he­jiang Beingmate Technology Industry & Trade Co said Monday that the company will cut prices for baby formula products by 5 to 20 percent starting Wednesday.

The company will str­eng­then internal expense control, adjust marketing strategies and optimize supply chain to offset the price reduction, which is unlikely to have a noticeable effect on its annual performance in 2013, Beingmate said in an announcement posted on the Shenzhen Stock Exchange.

Meiji-Dairy Trading Shanghai Co said Monday in a statement posted on its official website that it will cut prices of its baby formula products by 3 to 7 percent as soon as possible and offer the reduced prices in C­­hina for two years.

The three companies made the price cuts in response to an anti-trust probe of milk powder producers carried out by the National Development and Reform Commission (NDRC) earlier this month that found evidence that floor prices had been set for distributors and retailers.

Previously, FrieslandCampina Trading (Shanghai) Co announced Friday it will reduce prices of its Friso-branded milk powder by 5 percent. Nestle's Wyeth said Wednesday it would cut product prices by an average of 11 percent, and promised to continue selling the products at these prices in 2014.

The firms are responding quickly to appease the government and compete with peers that have price advantages, but the small range of price cuts will not cripple their performance, a sales agent with an imported milk powder brand told the Global Times Monday on condition of anonymity.

Meiji reduced prices of its main products by 3 to 4 percent and Friso cut prices by 5 percent, which will not largely affect the companies' sales as they can reduce marketing and management expenses to offset the profit reductions, he said.

Wyeth only cut the prices of non-mainstream products and avoided highly profitable products, he said.

The prices of milk powder products sold in China are more than double the prices overseas because of higher taxes, marketing expenses and price markups by distributors, making the net profit margin in the intensely competitive sector 10 to 30 percent, the agent said.

The firms have cut prices in hopes that the government will mitigate penalties, and more companies will likely follow suite, Zhu Danpeng, an analyst with food industry research firm 21food.cn, said Monday.

Mead Johnson, Abbot Laboratories and Biostime, which were also investigated by the NDRC, have yet to announce any price cuts.

The probe will moderate prices in the sector, as firms will reduce their marketing fees to offset declining profits caused by price cuts, which will benefit consumers, the agent said.

However, price cuts by well-known foreign brands will further reduce the market share of domestic brands, the agent noted.