Milk powder imports to dominate market

Rising trend started after 2008 formula scandal

BEIJING - China's milk powder imports have surged more than fourfold since 2008, when the melamine-tainted baby formula scandal was exposed, pressing hard on domestic milk powder manufacturers.

Statistics released by the General Administration of Customs on Friday show that milk powder imports to China set a new record each year since 2008. The number surged to 414,000 tons in 2010, tripling that of 2008. In the first three months of this year, 166,000 tons were imported.

This year is likely to be the first in which more than half of the milk powder sold on the Chinese mainland is foreign, industry experts estimated, after domestic and foreign producers split the market 50-50 last year.

"Based on current momentum, the foreign brands will surpass domestic ones this year, and they will take at least 60 percent of the baby formula market," Wang Dingmian, chairman of the Guangzhou Dairy Association, told China Daily over the phone.

As much as 600,000 tons of milk powder could be imported this year, he said.

The rise in imports is harming local businesses. Milk powder producers in many parts of the country, including Heilongjiang province and the Xinjiang Uygur and Ningxia Hui autonomous regions, have reported having an excess of stock and price wars with foreign brands.

"Sluggish sales and overstock have continued since 2008, which has weakened not only local enterprises but also big domestic brands," said Zhao Shuming, secretary-general of the Ningxia Dairy Industry Association.

Zhao said a ton of imported milk powder generally costs 3,000 yuan ($470) more than domestic milk powder. "So the Chinese manufacturers have to keep their prices low to compete with foreign brands," he said.

Moreover, imported milk powder has been noticeably attracting consumers in rural areas in addition to its monopoly in the urban market, especially regarding baby formula products.

Li Hailong, a native of the rural Shijiazhuang city, Hebei province, who works in Beijing, mails a can of imported milk powder back home every month for his 14-month-old son.

"I saw reports saying this country has the world's lowest quality standards in the dairy industry when it comes to bacteria count and protein content. But we want the best for the kid," said 28-year-old Li.

He said he is no exception. "I learned to do it from a fellow villager. We'll prefer higher-quality products as long as we can afford them," he said.

Many parents in big cities shun buying products with domestic milk powder for their children.

"Consumers have been hurt by a string of dairy scandals, from melamine-tainted baby formula incidents to 'leather milk' (milk containing a substance extracted from leather scraps)," said Li Xiaoxing, a 32-year-old Beijing mother who has stuck to a Japanese brand for her 19-month-old daughter.

"I don't know any young parents who buy domestic milk powder for their kids. It's even very rare for parents to buy foreign brands produced in China," said Chen Zhen, a Shanghai resident who has an 8-month-old son.

Dairy industry experts said it will take at least three years for domestic brands to reverse the year-on-year rise in import volume and win back their customers.