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Chinese formula grab leaves Australian shelves empty

By RJ Whitehead , 04-Jan-2013
Last updated on 04-Jan-2013 at 13:51 GMT2013-01-04T13:51:41Z

Chinese formula grab leaves Australian shelves empty

Stores in Australia are fighting to replenish stocks of infant formula following an unprecedented surge in demand from Chinese customers wary of the safety of products at home.

The problem has grown to such a level that some retailers in Australia have been forced to ration sales to just two cans as residents and tourists buy in bulk to ship the formula back home to family, or in some cases to resell it online.

Coles, a major Australian supermarket chain, is currently trying to arrange for extra shipments of formula, while Nutricia, the supplier of the top-selling Karicare brand, is running out of supplies due to the stockpiling.

Australian media reports have suggested that some pharmacies in Sydney had sold all their stocks of the two leading brands of baby milk before Christmas. Analysts attribute this spike to a combination of continued vigilance by parents in the wake of the 2008 scandal that saw 300,000 children fall ill after drinking milk tainted with the industrial chemical melamine, a more recent scare in September and a surge in tourists visiting Australia at this time of year.

Production quadrupled

Nutricia has already quadrupled its annual production over the last year to compensate for possible shortages, and said it was "working with supply partners to increase production capacity by a further 50% over the next 12 months," according to a company spokesman.

The Daily Telegraph newspaper in Sydney revealed this week that it had learned of Chinese students who had been recruited to buy hundreds of tins of formula in Australia to be sold on the black market in China for more than double the price they bought them for.

The paper claimed that an organised network was threatening the domestic supply of baby food. The Taobao website is currently offering Australian formula at A$54 a can, more than twice the A$24 retail price, the paper reported.

Michael Clifton, Austrade’s senior trade commissioner in Shanghai has called for more Australian-branded products to be made available for a growing Chinese market comprising 20% of the 18m babies born each year who are fed infant formula.

China recently slashed the tariff for imported infant formula from 20% to 5%, a move that will likely increase Australia’s portion of the Chinese market from its current 15% share—the country is China’s third-biggest baby milk importer, behind Singapore and New Zealand.

Analysts view the segment as being worth US$13bn at the moment, with some forecasts of it swelling to as much as US$26.3bn by 2017. Australia contributed to sales worth A$16.6 last financial year.

Neighbour also affected

Australian stores are not the only ones to be hit by the stockpiling, and Hong Kong retailers have also been forced to impose quotas on formula sales to those who have crossed the land border to pick up supplies. 

"Pharmacies only allow buyers to have one or two cans per transaction. Such measures are even stricter in northern districts near the border like Sheung Shui," Lau Oi-Kwok of the Hong Kong General Chamber of Pharmacy told the Hong Kong Standard. 

[The Australian reports] are not surprising at all. For mainland mothers, only foreign brands are trustworthy enough to be fed to their babies."

Hong Kong has been witnessing its worst formula shortage since December 2010, when mainlanders bought large amounts to stockpile. The shortage then led angry local parents to push for the introduction of a baby milk powder departure tax.

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