Are infant formula firms pulling the wool over parents' eyes? Report says "yes"

By Cheryl Tay contact

- Last updated on GMT

On average, Chinese households spend approximately 40% of their monthly income on infant formula. ©Getty Images
On average, Chinese households spend approximately 40% of their monthly income on infant formula. ©Getty Images
Parents in Hong Kong and China are the world's biggest spenders when it comes to infant formula, but consumer oragnisations have accused global manufacturers of 'exploiting parents concerns' around safety to charge premium prices.

A joint study by three corporate practice watchdogs — Changing Markets Foundation, Globalization Monitor and SumOfUs — and the European Public Health Alliance found that families in Hong Kong with children aged two to three months old spend a monthly average of $304 on infant formula; in China, the figure is $286.

On average, Chinese households spend approximately 40% of their monthly income on infant formula, far more than the 1% to 3% in Europe's top-spending households.

The report attributed this to China's 2008 melamine scandal, whose lasting effects have left consumers wary of domestic products.

The melamine contamination of milk and infant formula affected an estimated 300,000, including 54,000 hospitalised babies and six infant deaths.

Fleecing the folks?

However, the report, entitled Milking It — How milk formula companies are putting profits before science​, implied that parents may be overspending.

Its authors studied over 400 infant milk products from four top international manufacturers: Abbott, Danone, Mead Johnson and Nestlé.

They then concluded that the companies' "product differentiation is not science-based, but (is) instead informed by careful research into consumer preferences, and guided by a desire to increase manufacturers' market share and profits, especially in highly competitive, rapidly growing Asian markets"​.

At the same time, the relatively small global percentage (36%) of exclusively breastfed infants below six months old translates to a wealth of opportunities for dairy companies.

This is especially true in China, where domestic food safety fears fuel consumer fixation on imported food products, and higher incomes have increased spending power.

One of the authors, Globalization Monitor's Rena Lau, said, "Milk formula companies are exploiting the concerns of Chinese parents, who still remember vividly the melamine contamination scandal and experience environmental pollution in the country, so (they) are willing to pay more for premium products, as well as buy imported products."

"It is very concerning that premium products cost up to 2.5 times more and that they are not based on any scientifically proven beneficial value, but on parents' willingness to pay," ​she added.

Industry defence

In response, trade association APIYCNA (Asia Pacific Infant and Young Child Nutrition Association) released a statement saying that due to specific legislation regarding the composition, production and labelling of infant formula at both national and international levels, "the infant formula sector is one of the most rigorously regulated food sectors in the world"​.

It added that infant formula is produced based on current scientific research, and that many factors are involved when releasing any infant formula product.

These factors include "extensive research and development — which is at the core of infant and toddler nutritional products — the quality of ingredients, as well as production processes and packaging"​, alongside "environmental, regulatory or business considerations in each country"​.

It further stated: "When marketing follow-up formula and growing-up milk, our industry agrees that it needs to be ethical, unambiguous and done transparently.

"The marketing of formula should also contribute to the provision of safe and adequate nutrition for infants by ensuring the proper use of formula, when necessary, on the basis of providing appropriate education and adequate information."

The four manufacturers analysed in the report are also APIYCNA members.

Help or hindrance?

Chinese authorities have implemented stricter regulations​ for the country's infant formula industry, requiring both local and foreign manufacturers to register their products with the China Food and Drug Administration (CFDA) by the end of this year.

While consumers have welcomed the new laws in the wake of China's long history of food safety issues, manufacturers with a smaller market share may find themselves having to exit the country.

This will in turn mean less competition​ for established international brands whose products have already been approved under the new rules, including the four companies assessed in the report.

Despite the aforementioned concerns, Chinese parents seem to have no qualms paying top dollar for imported infant formula.

In fact, imports from New Zealand have been doing well in China — even amid the more stringent regulations — and the Chinese infant formula market is expected to see annual growth of 5.4%​ to 2021.

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