Mead Johnson's sales in China gaining ground

China could soon become US-based high-end infant formula producer Mead Johnson's largest market.

The company's sales in the country are currently only behind those of the US but are gaining ground rapidly on the back of last year's melamine scandal, which dropped sales of domestic formula makers, such as Sanlu and Mengniu, and turned parents' eyes to foreign brands.

Foreign brands occupy over 70 percent of China's high-end formula milk powder market and are expected to hold this dominant position for several years, said Jason Yu, general manager of Taylor Nelson Sofres (TNS) Worldpanel China, a market research company.

The next couple of years will be good for foreign brands such as Mead Johnson's Enfamil A+ series and Abbott's Simulac, said Shaun Rein, managing director of CMR China, a market research group. "They have close relations with the pharmaceutical sector and the better hospitals use them."

Sales volume of infant formula in China dropped 16 percent year-on-year during September to November 2008, as the scandal broke, but sales revenue increased 11.7 percent, mostly because consumer shifted to expensive imported brands, according to TNS.

Mead Johnson would not reveal its regional sales statistics for 2008 but had earlier target 20 percent growth in China for the year.

Mead Johnson Nutrition China General Manager Matthew Chapple earlier told Chinese media that China was a top priority for the company and its business in the country may soon match that in the US .

Chapple took over the company's Chinese operations in November 2007 and promptly changed its name from Mead Johnson (Guangzhou) Co Ltd to Mead Johnson Nutrition (China) Co Ltd, indicating plans to expand nationwide, according to Wu Kuo, a food and beverage analyst of Industrial Securities.

The company trimmed its operations in 2008 to focus on premium products such as the Enfamil series and tried to increase its distribution network in northern China.

But Mead Johnson is facing stiff competition in the country. Other foreign infant formula-producing companies, such as Wyeth and Dumex, are also trying to expand.

Wyeth announced last year it will spend 2 billion yuan constructing Asia's largest baby formula milk powder plant in Suzhou. Dumex said it will spend 800 million yuan increasing production at its Shanghai plant.

But some Chinese consumers of Dumex and Wyeth say their babies have suffered from kidney stones due to melamine content in the two companies' formulas. The companies insisted that their products have passed the national inspection and quarantine. The dispute is currently unresolved.

Mead Johnson had its IPO on the New York Stock Exchange on Feb 18, selling 34.5 million shares for $782 million. It was the first US company to list in New York this year and the IPO was largest in the US in 10 months.

(China Daily 03/30/2009 page8)