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Unnamed infant formula firms facing fines for Saudi Arabian price hikes

By Mark Astley+

15-May-2014

Infant formula firms facing fines for Saudi Arabian price hikes

Saudi Arabian authorities have warned seven domestic and international infant formula manufacturers and importers that they face severe penalties for illegally driving up the price of their products.

Earlier this week, the Saudi Arabian Ministry of Commerce and Industry (MCI) and the Trade Competition Council announced that an investigation into the “the price rises of infant formula in an increasing and synchronized way” by the “largest institutions and companies producing and importing infant milk into the Kingdom.”

Through visits to 10 offices in Riyadh and Jeddah, where they collected statements and confiscated documents, MCI ‘Control Teams’ claim to have uncovered various violations relating to “marketing procedures, administrative decisions, agreements and contracts.”

The seven, yet unnamed, companies under investigation have been given two weeks to rectify the identified issues before “stern measures” are taken by the MCI.

If not remedied, the firms could be fined up to 10% of their total sales for the year in addition to returning all profits from the illegal price increases.

Nestlé, Nutricia, Abbott Laboratories, and local dairy Almarai, which markets Mead Johnson Nutrition’s Enfamil brand through their joint venture the International Pediatric Nutrition Company, are among the largest players in the Saudi Arabian infant formula market.

DairyReporter.com approached Nestlé, Nutricia’s parent company Danone, Abbott Laboratories, and Almarai to ascertain whether they were under investigation.

None of the four companies contacted replied prior to publication.

Sales of infant formula in Saudi Arabia have rocketed in recent years.

In 2008, Saudi Arabian sales of infant, follow-on, toddler, and special formula were around 1.383bn Saudi Riyal (SR) ($369m, €269m).

By 2013, this figure had increased to SR3.437bn ($916m, €668m).

This growth, according to Euromonitor, was driven in part by a high birth rate and the growing number of working women in the country. 

But a sharp increase in unit prices in recent years played the largest part, it added.

The price of a 400g tub of infant formula has increased by between SR2 ($0.53, €0.39) and SR3 ($0.80, €0.58) to between SR29 ($7.73, €5.64) and SR37 ($9.87, €7.20), according to reports from Saudi Arabia . While a 900g unit now goes for between SR108 ($28.80, €21) and SR 130 ($34.66, €25.30) after an increase of between SR15 ($4, €2.92) to SR20 ($5.33, €3.90).

This gradual price hike has been well documented by local media outlets but little has been done until now to control these prices.

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