How Australia can help China solve its baby formula crisis

For over two years now, the media has featured regular stories about Australian parents not being able to find their favourite infant formula. Many of the brands have been disappearing from supermarket and pharmacy shelves almost as soon as they are put there.

The answer to this “disappearance” is by now well-established. The tins of formula are being snapped up by daigou – Chinese purchasing agents (students and others) based in Australia who can sell it online back home for more than twice the Australian retail price; and, in the process, earn themselves an amazing average annual pay packet of around $100,000.

While this phenomenon continues to prove frustrating for Australian parents, not much has been done about it. Retailers have limited sales per customer, but the view of the Government (and most commentators) is that the market will solve the problem. Correctly, most say that as Chinese demand continues, Australian manufacturers will find ways to send more formula to China and everyone will be happy.

The good news is that progress is being made. For example, in late April Bubs Australia, a maker of premium baby food and goat milk-based formula signed a distribution deal with QianJiaWanPu Co, China’s largest distributor of infant nutrition products. As a result, Bubs’ products will be available in 80,000 Mother & Baby Stores (MBS) in China.

The signing took place in Sydney at the Aus-China Infant Nutrition Roundtable, an event sponsored by Wattle Hill RHC Funds. Speaking at the event Kristy Carr founder and director of Bubs Australia pointed out that the daigou account for a relatively small proportion of the infant formula market. She said it is a complex landscape with three routes to market – the daigou, cross border e-commerce (CBEC) platforms like Alibaba, and the MBS.

“The e-commerce sector of the market [including daigou and established platforms] is probably around 32 per cent, while the MBS are about 52 per cent,” she said.
Australian products are sold via all three routes. Each has its benefits and each suits different types of businesses.

The importance of e-commerce
Keynote speaker at the Roundtable, John O’Loghlen, director of business development for Australia and New Zealand at Alibaba Group, said the belief that cross border e-commerce into China has a limited life is incorrect. He offered three reasons for this.

“Firstly, it’s critical for the Chinese and Australian authorities to have full transparency and be able to analyse imports and exports out of China and tax product appropriately at both ends.

“Making sure you have product direct from the factory, or its source to a bonded warehouse, and then with one logistics carrier taking it to the consumer again is an important solution to food safety concerns and other areas like tampering with product, counterfeit products and other challenges that can take place in the supply chain.”

Secondly, he pointed to “a simple reading of the tea leaves” and said that, despite the naysayers, both the Chinese Government and major e-commerce companies have continued to talk up this method of business. In addition, the first ever state-sponsored conference will take place in Shanghai in November.

“When something gets alleviated to that level and Beijing is supporting it, we can be quite confidant in saying the industry is headed in the right direction,” said O’Loghlen.

Thirdly, he said, e-commerce gives importers a real opportunity to test the Chinese market. “Getting onto e-commerce platforms, selling product, even in small volumes, gives you amazing transparency on consumer feedback,” he said.

Eva Zhang, CEO of Ecargo, the only ASX listed e-commerce service provider, reinforces this point of view.

“Cross border e-commerce is a very important channel for emerging Australian brands because it’s probably the most efficient way to test your products in China before you set up your physical distribution. That process can be very time consuming,” she said.
Different “tiers”, different markets

Unlike in Australia, Chinese cities are categorised into a “tier” system. These tiers measure things like population, consumer behaviour, income level, politics, and local trends. As Michelle Zhao, Founder CEO of Rui Ai, one of the largest MBS chains in China’s Sichuan province points out, in China, markets and consumer behaviour vary according to what Tier the city is.

Speaking at the conference through a translator, Zhao said, “The online business is popular among Tier 1 cities. And the brands and products that are appropriate for that channel are large and well-known brands.

“Most MBS stores operate out of 3rd and 4th tier cities. These customers look forward to service and the actual interface. There’s also a reliability when dealing with the source.” She said that MBS can offer mothers services (like day-care or even swimming lessons) that online businesses can’t). These stores represent a good opportunity for less well-known foreign brands like Bubs to sell their products.

Famously, Chinese consumers are drawn to the “clean, green” image of Australian food products and are prepared to pay a premium for them. In the case of infant formula sold in the MBS, parents have to pay even more than the already inflated prices found online.
According to Zhao, this does not affect sales in the MBS. “If there’s a difference between online and in stores, it shouldn’t be a problem. The store will always sell more even though the price is higher than online.

“If we look at the industry average price in China it’s about $49. In western markets its about $24. There’s a very large gap, but great opportunities for Australian products in China.”

Infant formula regulations in China
The Chinese Government has introduced regulation to the infant formula industry. All suppliers now have to be registered to sell their products. However, at this stage, there is still no regulation of cross border e-commerce sales.

Given the food safety concerns that are driving Chinese parents to seek out high-quality food products for their children in the first place, regulation is understandable. The worldwide prevalence of food fraud makes it is easy to take Beijing at its word when it says it wants to encourage reputable food manufacturers (both local and foreign-based).
Still, the move to registration has caused some anxiety among importers. Many smaller brands, in particular, were not prepared for registration.

Samuel Liu, Secretary General of China Nutrition and Health Food Association (CNHFA) and regulatory expert with China’s CFDA and CNCA, told the roundtable that if importers are nervous about regulation changes they should lobby the Chinese Government with their concerns.

However, he underplayed the significance of these fears and pointed out that, as of February 23 this year, a total of 148 facilities (both domestic and international) had been certified by CNCA and CFDA and that 136 brands (102 domestic and 46 international) of infant formula had been registered. In addition, as of that same date, 13 Australian companies had been registered (up five from the previous year).

He suggested Beijing has an open mind when it comes to regulation of food imports. “Registration for the Chinese Government is the most appropriate for the time to manage the industry but it may not be a continuous or long-term policy,” he said.

Bubs Goat Milk Infant Formula to be sold in Woolworths

Following a recent range review for the infant formula category, Bubs Advanced Plus+ Goat Milk Infant Formula will be available from selected Woolworths supermarkets in April.

Bubs Australia is pleased to announce that following a recent range review for the infant formula category, the company has received confirmation of ranging for all three stages of Bubs Advanced Plus+ Goat Milk Infant Formula in selected Woolworths supermarkets.

“Woolworths commitment to partner with genuine Australian producers, and respond to the rising demand and awareness of the digestive and nutritional benefits of goat dairy, including infant formula, should be commended,” said Bubs Australia Chief Executive Officer, Nicholas Simms.

He added that Bubs pathway to provenance through its strategic acquisition of Nulac Foods to become Australia’s only vertically integrated producer of goat milk infant formula guarantees sustainable supply and control over our key base ingredient and capacity to meet growing future demand, which is a key differentiator for Bubs versus other offerings in the market.

“Goat dairy and infant formula is experiencing rapid growth domestically and overseas. Woolworths ranging of Bubs Australian made goat milk infant formula will only further enhance the appeal to consumers both in Australia and internationally in China and South East Asia.” Simms said.

The Goat Milk Infant Formula will be available in selected Woolworths stores with high penetration of infant formula customers in April.

 

Bellamy’s China export licence restored

The shares of infant formula makers Bellamy’s have jumped by about 10 per cent, following the decision of Chinese authorities to lift a ban on products from one of the company’s canning facilities in Victoria.

The company said in a statement that the license for the recently-acquired Camperdown Powder facility has been restored.

Bellamy’s said it had responded to the requests on behalf of the CNCA (Certification Accreditation Administration of the People’s Republic of China) and worked with the assistance of Australian officials through the process as stipulated by the CNCA.

“We are pleased that Camperdown’s suspended registration has today been lifted,” said Bellamy’s CEO Andrew Cohen.

“Bellamy’s appreciates the important role that the CNCA has in protecting Chinese consumers and the support of the Australia trade officials in assisting us throughout this process.”

 

Nanoparticles in baby formula spark call for recalls

Friends of the Earth has called for the recall of three brands of baby formula following the results of independent testing on the products found traces of what it claims are potentially dangerous nanoparticles.

As the results below show, three of the seven samples tested contained nano-hydroxyapatite particles. Nano-hydroxyapatite has been found to cause cell death in the liver and kidneys of rats and is prohibited from use in infant formula in Australia in any form.

Friends of the Earth has called for an immediate recall of all affected brands and for the food regulator, Food Standards Australia New Zealand (FSANZ), to commission testing of all infant formula to ascertain what other brands contain hydroxyapatite or other unapproved and potentially harmful nanoparticles.

Two of these samples, Nestlé NAN H.A. Gold 1 and Nature’s Way Kids Smart 1, were found to contain a needle like form of hydroxyapatite. The European Commission’s Scientific Committee on Consumer Safety (SCCS) has concluded that this form of nano-hydroxyapatite should not be permitted in oral products such as toothpaste and mouthwash because of its potential toxicity.

FSANZ responded to the call for a recall, saying in a statement that it has reviewed the available information and concluded it does not contain any new evidence to suggest these products pose a risk to infant health and safety and that carers of babies should not be alarmed.

FSANZ said that the small amounts of hydroxyapatite involved are likely to dissolve in the stomach and that foods often include nanoscale sugars, amino acids and proteins.

Baby_formula_brands

Nature One Dairy secures China baby formula deal

Nature One Dairy has signed a deal to manufacture baby formula, specialised milk powder products and other health-related products for Chinese pharmacy group Sinopharm.

The deal would involve export of the products to China.

China’s new policy on infant formula, which takes effect on the January 1 2018, limits the number of brands that manufacturers can register in China. This is part of the Chinese government’s move to improve food safety in the world’s most populous country.

Nick Dimopoulos, CEO of Nature One Dairy said the strategic partnership will the company to tap into Sinopharm’s core business which covers distribution, retail, research, development and manufacture of prevention, treatment, diagnosis, care, and other health-related products across China.

“Our aim is to be able to produce a wide range of formulated products to meet the demands of different consumer groups. We are excited to be able to work with Sinopharm on their infant formula brand Happy Veve, as well as to co-develop new products for the China market with Sinopharm who is the largest retailer of medicines and healthcare products,” he said.

He said Sinopharm decided to partner with Nature One Dairy because of its pharmaceutical-grade manufacturing facility and stringent food safety and quality management program.

 

Bellamy’s chairman Rob Woolley quits

Bellamy’s Australia chairman Rob Woolley (pictured) resigned from the company this morning, ahead of a meeting that is expected to result in changes to the board.

AAP reports that, at that meeting, the infant formula maker’s shareholders will vote on a board spill led by Kathmandu founder Jan Cameron. It is expected that three directors will be the targets of the meeting.

As the AFR reports, former Virgin Australia director David Baxby is a potential replacement for Woolley.

New Chinese regulations have dramatically lowered the company’s sales in China, and its shares have fallen sharply. Previously, booming demand in that country had seen its share price soar.

On January 12, the company ended a 40-day trading halt and also announced a cut to its profit guidance for the next six months.

Shares in Bellamy’s last traded at $4.27.

Image: Bellamy’s

Bellamy’s sacks CEO Laura McBain

Infant formula maker Bellamy’s has dumped CEO Laura McBain and replaced her with chief operating officer and chief strategy officer Andrew Cohen.

As the ABC reports, the company yesterday ended a 40-day trading halt and also announced a cut to its profit guidance for the next six months.

On December 2, following an announcement by Bellamy’s that new Chinese regulations were dramatically lowering sales in China, shares in the company fell by more than 40 per cent. Previously, booming demand in that country had seen its share price soar.

Cohen will take on the CEO role on a temporary basis while the Board undertakes a search for a permanent replacement.

“Laura has overseen the growth of the Company over the past decade since she joined Bellamy’s as General Manager in 2006, including the expansion of Bellamy’s markets and its brand. I would like to thank Laura for her contributions to Bellamy’s over the last 10 years,” Chairman, Rob Woolley said in a statement.

Bellamy’s shares plunge 41pc

Bellamy’s shares have dropped dramatically as the infant formula maker deals with slow sales in China.

AAP reports that Bellamy’s shares were down $4.98 – a 41 per cent fall – at $7.15 at 1041 AEDT. The company also warned that revenue for 2016/17 may be lower than last year’s result.

The company was expecting sales on Single’s Day, the Chinese online shopping event, to be higher than they were.

Combined with regulatory changes in China, this may see revenue drop from Last year’s $244.6 million to less than $240 million.

Infant and toddler formula

Nutrico Optimum infant and toddler formula is 100 per cent made in Australia from 100 per cent Australian powdered milk. The company is also 100 per cent Australian owned with its Stage 1, 2 and 3 formula distributed in Australia by Grocery Industries Australia.

Nutrico includes essential nutrients in each of its three stages including the prebiotics FOS and GOS, DHA (Omega 3), Taurine, Choline, Beta-Carotene and L-Carnitine.

Nutrico’s other key benefits are that it does not include artificial sweeteners, colours and flavourings, which are commonly found in branded infant formulas in Australia.

Graham Moran, National Business Manager of Grocery Industries Australia, said they are very excited to be associated with Nutrico and will be aiming to have Nutrico retailed in the 1,200 plus independent supermarkets they deal with Australia-wide.

“We have been looking for an infant formula range and Nutrico ticks all the boxes for us including being Australian made and owned, free from artificial sweeteners, colours and flavours, and of the highest nutritional value. We are confident Nutrico will be supported by shoppers and is truly optimum nutrition for their little ones,” Moran said.

Nutrico is produced from milk farmed in the western district of Victoria through its production partner Camperdown Dairy International (CDI).

Grass fed baby formula

Munchkin is bringing its 100% New Zealand grass fed baby formula, Munchkin Grass Fed to the Australian market.

Recognising there was no industry standard for producing high quality, 100% grass fed milk, the comapny created its own. Each dairy cow is milked a maximum of two times every 24 hours and produce milk that is certified to be GMO free, grain free, and rBGH free. All farmers signed up to the company’s 100% Grass Fed program receive a premium to ensure they deliver top quality milk for little ones.

Munchkin Regional Sales Manager, Gary Hunter said, “Most parents aren’t aware that formulas are typically made up of 65% milk or milk by-products, and therefore the quality of the milk is of paramount importance. Keeping our New Zealand cows on strict grain free diets of 100% grass and forage ensures that only the best milk goes into our Grass Fed Formula. We’re excited to see how the discerning Aussie parent takes to it.”

According to the company, unlike organic and other milk based baby formulas on the market produced from cows that eat a combination of silage, corn, gluten and grass, the grass fed difference not only results in a great tasting, premium milk formula, but milk that is higher in nutritional benefits for tiny tummies including:

  • Up to five times the amount of CLA
  • An ideal balance of fatty acids, vitamins, nutrients and protein, without the addition of hormones like rBGH
  • Higher levels of Vitamin A, Vitamin E and beta-carotene

For added benefits, the baby formula also contains Lutein and Omega 3 fatty acids ARA and DHA (hexane free) to help support brain development and eye sight.

Nanoparticles in baby formula: should parents be worried?

There’s a lot of stuff you’d expect to find in baby formula: proteins, carbs, vitamins, essential minerals. But parents probably wouldn’t anticipate finding extremely small, needle-like particles. Yet this is exactly what a team of scientists here at Arizona State University recently discovered.

The research, commissioned and published by Friends of the Earth (FoE) – an environmental advocacy group – analyzed six commonly available off-the-shelf baby formulas (liquid and powder) and found nanometer-scale needle-like particles in three of them. The particles were made of hydroxyapatite – a poorly soluble calcium-rich mineral. Manufacturers use it to regulate acidity in some foods, and it’s also available as a dietary supplement.

Needle-like particles of hydroxyapatite found in infant formula by ASU researchers.
Westerhoff and Schoepf/ASU, CC BY-ND

 

Looking at these particles at super-high magnification, it’s hard not to feel a little anxious about feeding them to a baby. They appear sharp and dangerous – not the sort of thing that has any place around infants. And they are “nanoparticles” – a family of ultra-small particles that have been raising safety concerns within the scientific community and elsewhere for some years.

For all these reasons, questions like “should infants be ingesting them?” make a lot of sense. However, as is so often the case, the answers are not quite so straightforward.

What are these tiny needles?

Calcium is an essential part of a growing infant’s diet, and is a legally required component in formula. But not necessarily in the form of hydroxyapatite nanoparticles.

Hydroxyapatite is a tough, durable mineral. It’s naturally made in our bodies as an essential part of bones and teeth – it’s what makes them so strong. So it’s tempting to assume the substance is safe to eat. But just because our bones and teeth are made of the mineral doesn’t automatically make it safe to ingest outright.

The issue here is what the hydroxyapatite in formula might do before it’s digested, dissolved and reconstituted inside babies’ bodies. The size and shape of the particles ingested has a lot to do with how they behave within a living system.

Size and shape can make a difference between safe and unsafe when it comes to particles in our food. Small particles aren’t necessarily bad. But they can potentially get to parts of our body that larger ones can’t reach. Think through the gut wall, into the bloodstream, and into organs and cells. Ingested nanoscale particles may be able to interfere with cells – even beneficial gut microbes – in ways that larger particles don’t.

These possibilities don’t necessarily make nanoparticles harmful. Our bodies are pretty well adapted to handling naturally occurring nanoscale particles – you probably ate some last time you had burnt toast (carbon nanoparticles), or poorly washed vegetables (clay nanoparticles from the soil). And of course, how much of a material we’re exposed to is at least as important as how potentially hazardous it is.

Yet there’s a lot we still don’t know about the safety of intentionally engineered nanoparticles in food. Toxicologists have started paying close attention to such particles, just in case their tiny size makes them more harmful than otherwise expected.

So where does this leave us with nanoscale hydroxyapatite needles in infant formula?

What do regulators know about nano-safety?

Putting particle size to one side for a moment, hydroxyapatite is classified by the US Food and Drug Administration (FDA) as “Generally Regarded As Safe.” That means it considers the material safe for use in food products – at least in a non-nano form. However, the agency has raised concerns that nanoscale versions of food ingredients may not be as safe as their larger counterparts.

Some manufacturers may be interested in the potential benefits of “nanosizing” – such as increasing the uptake of vitamins and minerals, or altering the physical, textural and sensory properties of foods. But because decreasing particle size may also affect product safety, the FDA indicates that intentionally nanosizing already regulated food ingredients could require regulatory reevaluation.

In other words, even though non-nanoscale hydroxyapatite is “Generally Regarded As Safe,” according to the FDA, the safety of any nanoscale form of the substance would need to be reevaluated before being added to food products.

Despite this size-safety relationship, the FDA confirmed to me that the agency is unaware of any food substance intentionally engineered at the nanoscale that has enough generally available safety data to determine it should be “Generally Regarded As Safe.”

Hydroxyapatite nanoparticles may have different health effects from larger versions of the mineral.
Westerhoff and Schoepf/ASU, CC BY-ND

 

Casting further uncertainty on the use of nanoscale hydroxyapatite in food, a 2015 report from the European Scientific Committee on Consumer Safety (SCCS) suggests there may be some cause for concern when it comes to this particular nanomaterial.

Prompted by the use of nanoscale hydroxyapatite in dental products to strengthen teeth (which they consider “cosmetic products”), the SCCS reviewed published research on the material’s potential to cause harm. Their conclusion?

 

This recommendation was based on a handful of studies, none of which involved exposing people to the substance. Researchers injected hydroxyapatite needles directly into the bloodstream of rats. Others exposed cells outside the body to the material and observed the effects. In each case, there were tantalizing hints that the small particles interfered in some way with normal biological functions. But the results were insufficient to indicate whether the effects were meaningful in people.

Importantly, these studies didn’t consider what happens when particles like this end up in the digestive system, including the stomach.

So what happens when a baby eats them?

The good news is that, according to preliminary studies from ASU researchers, hydroxyapatite needles don’t last long in the digestive system.

This research is still being reviewed for publication. But early indications are that as soon as the needle-like nanoparticles hit the highly acidic fluid in the stomach, they begin to dissolve. So fast in fact, that by the time they leave the stomach – an exceedingly hostile environment – they are no longer the nanoparticles they started out as.

These findings make sense since we know hydroxyapatite dissolves in acids, and small particles typically dissolve faster than larger ones. So maybe nanoscale hydroxyapatite needles in food are safer than they sound.

This doesn’t mean that the nano-needles are completely off the hook, as some of them may get past the stomach intact and reach more vulnerable parts of the gut. But the findings do suggest these ultra-small needle-like particles could be an effective source of dietary calcium – possibly more so than larger or less needle-like particles that may not dissolve as quickly.

Intriguingly, recent research has indicated that calcium phosphate nanoparticles form naturally in our stomachs and go on to be an important part of our immune system. It’s possible that rapidly dissolving hydroxyapatite nano-needles are actually a boon, providing raw material for these natural and essential nanoparticles.

The formula’s safe, but begs other questions.
Andrew Maynard, CC BY-ND

Tempest in a baby bottle

And yet, even if these needle-like hydroxyapatite nanoparticles in infant formula are ultimately a good thing, the FoE report raises a number of unresolved questions. Did the manufacturers knowingly add the nanoparticles to their products? How are they and the FDA ensuring the products’ safety? Do consumers have a right to know when they’re feeding their babies nanoparticles?

Whether the manufacturers knowingly added these particles to their formula is not clear. At this point, it’s not even clear why they might have been added, as hydroxyapatite does not appear to be a substantial source of calcium in most formula. (Calcium in formula can come from a number of sources, including milk solids, calcium carbonate and calcium chloride.) If the nanoparticles’ inclusion was intentional, though, current FDA guidelines suggest that the regulator wouldn’t consider the material safe by default, and should be subject to further evaluation.

Certainly, from the data presented, these particles – so uniform in size and shape – look like they were intentionally manufactured to be nanoscale and needle-like. It’s possible they were supplied to the various manufacturers without any indication of their “nano-ness.” This doesn’t absolve the manufacturers of responsibility. But it does suggest that greater scrutiny and accountability is needed in the supply chain for food ingredients.

And regardless of the benefits and risks of nanoparticles in infant formula, parents have a right to know what’s in the products they’re feeding their children. In Europe, food ingredients must be legally labeled if they are nanoscale. In the U.S., there is no such requirement, leaving American parents to feel somewhat left in the dark by producers, the FDA and policy makers.

Given the state of science on nanoscale hydroxyapatite in foods, this is as much an issue of trust as it is safety. The FoE report may exaggerate the possible risks, and raise concerns where few are justified. Yet it’s hard to avoid the reality that, if manufacturers are adding nanoparticles to what we feed our children, we need to know more about how to ensure their safety and benefits. How else can we enable informed decisions?

Luckily, current research suggests hydroxyapatite nanoparticles in formula are most likely safe, and arguably, even beneficial. But given how high the stakes are, safety here should not, and indeed cannot, be taken for granted.

The Conversation

Andrew Maynard, Director, Risk Innovation Lab, Arizona State University

This article was originally published on The Conversation. Read the original article.

Australian share markets hit by Chinese need for baby formula

Shares in some of Australia’s most-popular infant formula brands have been caught up in the market woes about the health of China’s economy.

Amid increasing concerns that the world’s second-largest economy will cool further in 2016, Beijing said China’s economy had only expanded 6.9 per cent in 2015, the slowest pace in 25 years.

Bellamy’s Organic has eased to 14.6 per cent while trans-Tasman producer a2 Milk has fallen 26.7 per cent in the past four weeks.

Despite struggling to keep their products on Australian supermarket shelves, infant formula makers are still reporting strong sales.

According to NAB agribusiness economist Phin Ziebell, demand for infant formula in China should continue to remain strong, particularly as the country moves from a manufacturing to consumption-led economy.

“There was the melamine scandal in 2008 and understandably people were terrified about that because food safety is a serious problem. That means for your infant formula there is going to big demand for product that isn’t adulterated with poison,” Ziebell said.

China continues to step out of the global dairy market in the past 18 months while it ran down inventories of milk powder, triggering a halving of prices for key dairy commodities.

NAB is forecasting a "slow recovery" of global dairy prices this year, which will be bolstered by a lower Australian dollar that it expects will hit 66 US cents by June.

"Australian prices are also likely to be supported by the ongoing international interest in our products," said NAB regional agribusiness manager Dave Davies.

"Free trade agreements such as the China Free Trade Agreement will only help this trade, especially if we can operate on a more level playing field with the New Zealand industry."

Supply and demand: How Australia could solve China’s baby formula problem

Economic experts at Deakin University are highlighting the images of angry parents unable to buy baby formula for their children as a need to better regulate the impact of trading practices in Australia.

According to results of research conducted by Deakin Business School’s Department of Economics, products brought in one country and sold in another without the permission of the manufacturer by people travelling between the two countries is presenting a challenge not only for Australia but also other countries and territories such as Japan, Hong Kong and the United States.

Department of Economics senior lecturer Dr Xuan Nguyen says researchers considered the impact of parallel trade on the financial welfare of the home country (based on a combination of the financial benefits to consumers, producers and government revenue) and what actions could be taken to ensure no one was disadvantaged.

“In this situation there is a demand in China for high quality baby formula. This demand is being met by parallel traders who travel to Australia, buy large amounts of baby formula and then sell the product back in China. Here we see that the manufacturers of the baby formula benefit from the sales because of the increased demand and the parallel traders make a profit from selling the formula at a higher price back in China,” Dr Nguyen said.

The researchers found it was possible to get the balance right with parallel trade, rather than outright banning the practice.

“A key recommendation from our study is the implementation of good government policy measures to control the quality of product people can take out of Australia via the parallel trade channel. This would involve a change of policy for many players from the producers, to the pharmacies and supermarkets, as well as customs,” Dr Nguyen said.

The research paper Cross-border Travellers and Parallel Trade: Implications for Asian Economies is the first theoretical attempt in the economics literature that studies parallel trade by cross-border travellers. 

Asian consumers angry at Woolworths for blocking baby formula orders

Woolworths has been accused of racially profiling customers after Woolworths cancelled three online baby formula orders and suspending their accounts.

Within the past month, Sydney parents Adrian Cheng, Reginald Dong and Sarah Kong had their online orders for tins of baby formula cancelled –something they blame on their Asian surnames.

Australian parents have become increasingly concerned about a baby formula shortage of preferred brands, such as A2 Platinum and Bellamy’s Organic, calling for Woolworths and Coles to enforce purchase limits and clamp down on bulk buying.

According to Korean-Australian mother Sarah Kong, her account was suspended after she ordered four tins of formula on New Year’s Eve and received a confirmation email and the expected time of arrival.

“At every point in this process you have failed in customer service. At worst it is fraud to have accepted the order, taken the money, imply that I contacted you for a refund and then block my account,” Kong said in a complaint to Woolworths.

Following consumer pressure late last year, Woolworths lowered its baby formula purchase limit to four per transaction, while Coles lowered it to two.

A Woolworths spokesman said the chain was trying to manage its supplies of formula for its online customers in a period of high demand.

“In some cases we suspend accounts pending a confirmation that the order fits within our terms and conditions. In any case where a customer has had a poor experience, Woolworths apologises for this,” the spokesman said.

Erin Chew, spokeswoman for the Asian Australian Alliance, said following the widespread media coverage of the baby formula shortfall late last year, a "xenophobic spotlight" had unfairly focused on the Chinese.

"We need a change in how Australians view those of Chinese ancestry. The really unfair aspect is that families like Cheng and Dong are well integrated Chinese Australian families," she said.

Chinese demand for Western baby formula rocketed after a string of food scares, including the 2008 melamine contamination that killed six babies and made 300,000 seriously ill.
 

Chinese parents get instant confidence on Australian dairy

A new platform has been developed to allow Chinese consumers to quickly check the authenticity and provenance of its provenance of its products using just their smartphones. 

In partnership with product and inspection experts Matthews Australia, Camperdown Dairy International has developed a system that prints each tin of infant milk formula with a unique QR code with human-readable.

The printed QR code allows consumers to scan and identify the individual product and report its history; it also displays key information on how best to consume the product.

According to Camperdown’s General Manager Gavin Evans, “We recognised that Chinese consumers want certainty that the product they give to their children is real, and is sourced from the country of origin that is stated on the packaging. We want them to be able to easily access that information with just their smartphone, and they can do this at the retail store or later at home.”

The tins are laser-marked during production and can be scanned at any point in production, distribution, retail or post-sale.

Matthews provides technology solutions to help code products with technology that suits each customer’s purpose and goals; check all product and packaging to eliminate coding and labelling errors; capture more data on the factory floor in real-time; and manage the process from one point of control.

Camperdown has been focused on increasing production at is Melbourne-based site to supply China and the domestic market, as the company has been granted its Chinese infant-formula manufacturing and export licence in July 2015.

Chinese regulators are requiring infant-milk-formula producers to provide comprehensive tracking and identification systems in response to consumer concerns about food safety. 

The a2 Milk Company growing on the back of baby formula

The a2 Milk Company has forecast its revenues will hit $285 million in the 2016 financial year.

The milk company said it has experienced a significant uplift in sales of infant formula in the month of November, exceeding the sales projected at the time of the previous forecast. This is expected to continue in the month of December. 

Based on the current trading trends, the a2 Milk Company is now forecasting Group revenue in the range of $300 million to $315 million, and Group operating EBITDA in the range of $33 million to $37 million for the 2016 financial year.

The Company’s Managing Director & CEO Mr. Geoffrey Babidge said, “The infant formula market in Australia is rapidly evolving and experiencing significant growth. The Company has recently increased the supply of a2 Platinum infant formula to our customers however we continue to experience a level of out of stocks on shelf. The strong trading performance advised today provides further evidence of the increasing appeal of the a2 Platinum brand in Australia and China and the growth potential in additional markets in the future”.

Fonterra and Bellamy’s team up for baby formula

Fonterra Australia and Bellamy’s Australia announced today plans to enter into a five year, multi-million dollar strategic agreement to manufacture a range of new baby nutritional powders.

 
Fonterra Managing Director Oceania Judith Swales says today’s announcement is part of Fonterra’s transformation of its Australian business.
 

“This is our strategy in action for Australia where we focus on the areas we can win in a highly competitive market to deliver the best returns,” said Ms Swales.
 

“We are actively growing our nutritionals business through strategic partnerships and agreements which will see the Darnum nutritionals plant move towards full capacity.”
 
“Our Australian business has particular ingredients strengths in cheese, whey and nutritionals, complemented by our strong consumer and foodservice businesses; and today’s announcement with Bellamy’s Australia – one of the fastest growing infant formula companies – reaffirms our strength in nutritionals.”
 

“The Darnum plant is a leading nutritionals plant in Fonterra’s global network. Leveraging our Fonterra Research and Development Centre in Palmerston North, the largest dairy innovation centre in the southern hemisphere, we will bring innovation to the Darnum plant and the nutritionals market to capture growing demand.”
 

Bellamy’s is one of the fastest growing infant formula companies with strong brand recognition and expertise in the organic ingredient supply chain. Bellamy’s has experienced continued growth over many years, and financial year 2014-15 has been exceptional, achieving revenue growth of 156 per cent from the year prior. Formula comprises 88 per cent of Bellamy’s sales.
 
“The proposed multi-million dollar strategic agreement will help support the growth of Bellamy’s Organic in Australia and abroad, and builds on our strong current relationship.”
 
Fonterra and Bellamy’s will finalise the proposed arrangements by the end of the year, with the agreement commencing in 2016.
 

CHOICE spits the dummy over infant formula shortages

Consumer advocacy group CHOICE has provided a list of suggestions that the Federal Government could use to ensure Australian mums have access to infant formula for children under the age of one.

In addition to encouraging parents to report shortages at retailers or supermarkets across the country, CHOICE has called on the government to enforce rules that limit the number of tins that can be brought at one time.

CHOICE media spokesperson’s Kate Browne says the popularity of formula feeding in China has meant that health and quality problems become more commonplace as the middle class has continued to rise.

“Babies under one often need formula for nutrition and for some it’s their only reliable food source. Consumers need protections so they can ensure their babies receive enough nutrients.”

“It’s now time for the Federal Government to act to ensure access to a reliable baby formula supply to protect some of the nation’s youngest and most vulnerable consumers,” Browne said.

In discussing the food shortage with Food Magazine, Browne looked to solutions put forward in Hong Kong and New Zealand that addressed the problem with a range of options –including stockpiling formula in a similar fashion to normal medications. 

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