2 Infant Formula Makers to Cut Prices After China Starts an Investigation
By REUTERS
Published: July 4, 2013
HONG KONG — The Swiss food company Nestlé and its French rival, Danone, say they are cutting their prices of infant formula inChina after Beijing began an investigation into possible price-fixing and anticompetitive behavior in the sale of milk powder.
Wang Zhao/Agence France-Presse — Getty Images
Milk powder on sale in Beijing. Companies could be fined or more strictly regulated, or both.
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Wyeth Nutrition, which Nestlé bought last year, said this week that it had been cooperating with the investigation by the National Development and Reform Commission of China and was responding by cutting prices and improving sales and marketing practices.
Danone, which has also acknowledged that its Dumex unit was cooperating with the Chinese commission, said in an e-mail statement that it was preparing a price cut proposal with details to be disclosed later.
Both companies, along with Mead Johnson Nutrition and Abbott Laboratories, said earlier this week that they were being investigated by the Chinese commission.
In a statement, Wyeth Nutrition said it “decided to implement a price reduction” of products from July 8 through 2014. “The average reduction will be at 11 percent, with the biggest single product price reduction at 20 percent.”
The company said it would not raise prices on any new products over the next year. Wyeth did not give any further details.
Analysts said the investigation could result in fines and tougher rules governing imports into an infant milk market expected to grow to $25 billion by 2017. The firms could face fines ranging from 1 percent to 10 percent of their annual sales, the state-run Xinhua news agency quoted experts as saying.
Some analysts see the inquiry as possibly part of a broader Chinese plan to increase consumption of local infant-milk products. Mothers turned away from Chinese milk powder in 2008 when infant formula tainted with the industrial compound melaminekilled at least six babies and made thousands sick with kidney stones.
China has since made efforts to crack down on persistent food safety problems that have included chemical-laced pork and infant milk contaminated with cancer-causing agents.
Some Chinese producers of infant formulas have started forming partnerships with foreign companies to try to increase brand recognition and gain technical expertise.
Foreign brands may also soon have to rely on their Chinese partners if they want greater access to the Chinese market. The Chinese government has expressed an interest in bringing the supply chain under the control of Chinese firms as part of its goal of reducing the number of local infant formula producers to 10 from more than 200 within two years.
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