News

Formula shortage a myth

By Dairy News

THERE MAY be empty supermarket shelves and rationing, but processors say there is no problem with baby formula supply.

With an estimated value of $600 million, the Australian-made infant formula market has proved a lucrative one for ‘daigou’ shoppers, people who purchase the product in Australia before selling the tins at a significant premium in China.

Yet dairy processing company Freedom Foods, who makes Australia’s Own Diamond pro+ infant formula, said Australian parents should not be subjected to “scare campaigns”.

“There is enough supply for Australian mothers as well as exports to China,” group general manager of nutrition Sonja Kukuljan said.

“To suggest otherwise is irresponsible. It’s about time everyone involved in baby formula production and retailing acknowledges the idea of a shortage is a myth that just so happens to have marketing benefits.”

Dr Kukuljan said there should not be extended issues with supply.

“If there are, perhaps the individual infant formula manufacturers facing such hiccups need to review their historical trend analysis and production schedules to better manage the demand and supply cycles.

“In the short term, families can vote with their feet and choose premium infant formula brands which are produced and marketed specifically for the domestic market, to make sure their supply is guaranteed.

“Australia’s Own closely monitors its historical sales data to inform its production schedules, and mitigate any possible supply issues, because we understand that making infant formula in a way that guarantees supply is critical for families. Anything less is unacceptable.”

Infant formula has been a driver for a number of company’s success, particularly the a2 Milk Company which has seen profits skyrocket as a result of their formula a2 Platinum.

The brand is highly sought after overseas and regularly sold out in Australian supermarkets, and now available via cross border e-commerce platforms and in more than 10 000 “Mother and Baby” stores in China or on domestic e-commerce sites.

A2 Asia Pacific chief executive Peter Nathan said the signs on supermarket shelves were indicative of the strong demand for the product, however he said there was no shortage of milk formula across the board.

“I dare say that if you went into a supermarket in Shepparton (northern Victoria) you would be able to find milk formula, but you may not find a certain type,” Mr Nathan said.

“There are only a couple of brands which are experiencing very high levels of demand. The A2 platinum is drawing very strong demand in China.”

The reasons included memories of the melamine contamination about 10 years ago, a suspicion of the domestic Chinese market, and Australia’s reputation as having very high food standards.

Mr Nathan said the company had taken action to reassure Australian parents they would never be short of their A2 platinum brand powder, by offering on-line, direct deliveries of the product.

Nutritional demand shows export gap

Although the ‘grey market’ for infant formula may be thriving, it’s not all bad news according to one economist, who says the product has enormous potential to lift the Australian dairy industry.

NAB agribusiness economist Phin Ziebell said demand for Australian infant formula had been “very strong” for a number of years as a result of the melamine contamination scare in Chinese product more than 10 years ago.

“The dairy industry could see more success in exporting to markets with those high wealth consumers where there is a lot of demand for quality product overseas,” Mr Ziebell said.

Mr Ziebell said demand for Australian infant formula had been “very strong” for a number of years and it was a “tough thing” to balance production and increasing demand.

“The dairy industry could see more success in exporting to markets with those high wealth consumers where there is a lot of demand for quality product overseas,” he said.

Although recent trade talks have opened more doors to Australian producers in China, Mr Ziebell acknowledged there was more work to be done to get more Australian product into the hands of Chinese consumers.

Analysis of the Chinese market by international data and consultancy groups reveals that Chinese consumers are incredibly brand loyal when it comes to brands of infant formula, a fact that has allowed many companies to cash in on the lucrative overseas market.

Skyrocketing sales in China and booming baby formula sales saw The a2 Milk Company’s 2016–17 profits triple to $82 million in after tax profit in the past financial year, including a jump of more than 130 per cent in revenue from China and Asia.