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Foreign milk powder brands start new price hikes in China

06-25-2012 11:21 BJT

BEIJING, June 25 (Xinhuanet) -- Foreign milk powder brands have started a new round of price hikes in recent months in China. The price of a particular brand of imported powdered milk is four times higher than that found on its official online store based abroad.

The listed price of the organic infant powdered milk on the official website of German Te Fufen milk is only 9.95 euros, about 80.05 yuan, or only a quarter of its retail price in China.

The milk powder produced in Australia and New Zealand is three times as expensive in China as in their own countries, some milk powder buyers said.

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

Even though imported milk powder has to pay customs, it is far from reaching the point of prices continuing to double, said the report.

The extra costs of the imported milk powder mainly come from import duties and inspection fees, apart from warehouse costs, which account for 28 to 30 percent of its original price, Wang Dingmian, chairman of the Guangzhou Dairy Association, said.

A kilogram of imported milk powder was levied a tariff of 32 yuan at Shanghai Customs in January. Even with packaging, transport and sales factored in, the cost for a tin of 900-gram milk powder sold in China should only be 80 to 90 yuan more than its foreign manufacturer's price.

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.

However, Wang Dingmian said,"high prices and high profits are the two marketing philosophies for foreign milk powder manufacturers."

Chinese consumer psychology has an obvious influence on the rising price of foreign imported milk powder, because they believe that the high price correlates to high quality, the report said.

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.

Industry insiders say the gross profit margin has remained at more than 50 percent for almost all imported milk powder brands in China.

MeadJohnson, a US-based milk powder producer, has found its gross margin at a stable rate of 63 percent since 2009 while French Biostime said its gross profit topped 70 percent in the 2011 annual.

A baby boom in the current Year of the Dragon in the Chinese zodiac has led to an increase in imported infant formula. It is a huge market for foreign brands to penetrate.

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.

The current security and quality of domestic dairy products and infant formula milk powder are in the best period of their history, according to infant milk powder quality reports released by China Dairy Industry Association.

According to the reports, many efforts brought this change. Firstly, the newly revised infant milk powder standard is one of the most stringent standards in the world. Secondly, raw materials have been protected in quality and safety. In addition, advanced processing technology and equipment, perfect quality assurance system and improved national regulation have also provided support to the industrial change.

Editor:Sun Luying |Source: Xinhua

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