30 Apr 2015

Impact of rival infant formula downplayed

5:41 am on 30 April 2015

Members of the infant formula industry are playing down the impact on New Zealand from a new range targeting the Chinese market.

Infant milk formula cans


Last month Chinese company New Hope Nutritional Foods Ltd and Canterbury-based Synlait launched a baby formula under a new brand Akarola to be sold exclusively online.

Keith Woodford, professor of agri-food systems at Lincoln University and independent consultant, said the new infant formula was set to shake-up the industry.

"What we're going to see is a lot of consolidation in the market in China. There's still probably 100 brands out there, maybe more, and in several years time that's going to drop all the way down to 10 or 15."

He said prices in China were more than double those of the rest of the world and by selling the product online companies were able to bypass additional middle men and reduce the price.

However David Mahon, managing director of Mahon China Investment Management, said the new range faced difficulties as consumers saw cheap products as being of a lower quality.

"It's unlikely however to challenge the imported infant formula brands, and it will struggle to gain the upper middle class or middle class market because it is priced so low," he said. However if many other companies began the same type of marketing it could be a different picture.

Director of infant formula manufacturer and brand owner Pacific Industries, Jeremy Harris, said Chinese consumers wanted to see an established product.

"I don't really see a significant change in the short term because unless a product is being marketed in New Zealand, the Chinese mothers aren't particularly interested. They want to be purchasing brands that are known and well trusted within New Zealand."

Mr Harris said while it would not affect New Zealand manufacturers and exporters directly, it would force some to look at their systems.

"There'll be people that have to look at the way they distribute in the Chinese market is it efficient but it's going to be more likely the changes will have to be made in China rather than New Zealand."

Chief executive of infant formula exporter NZ Dairy Products, Chris Berryman, agreed it would not affect profits in New Zealand, but said it may force the industry to pay more attention to online sales.

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