Analysts see limited room for hikes

Mead Johnson likely to raise prices: report

By Li Qiaoyi

Mead Johnson Nutrition Co, the world's biggest standalone baby formula maker, is said to raise prices of its products sold in the Chinese market starting next month. But analysts said there will be limited room for milk powder price hikes compared to the recent years.

The Glenview, Illinois-based baby formula manufacturer plans to change the packaging of products sold in the Chinese market and raise prices by 10-20 percent at the end of March, the first price increase in more than two years, Southern Metropolis Daily reported yesterday, citing an unnamed source.

A PR manager at Mead Johnson Nutrition China declined to comment when reached by the Global Times yesterday.

US-based baby milk powder producer Abbott Laboratories is also reportedly planning to lift prices in the near future. Abbot could not immediately be reached for confirmation.

The price hike rumors have heightened the market's anxieties, after domestic milk powder producer Heilongjiang Wondersun Dairy Co announced last week a price hike effective next month.

But there is no confirmation yet about the price hikes by major foreign milk powder manufacturers.

Nestle has no plans to raise prices of its milk powder products sold in China, He Tong, a spokeswoman for Nestle China, told the Global Times yesterday.

Frisco China echoed Nestle. "We have no plans to raise prices," Huang Fang, a spokesperson for Frisco China, said yesterday.

The domestic market of milk powder and baby formula in particular has been increasingly dominated by foreign brands after the 2008 melamine-tainted milk scandal.

Five major foreign milk powder brands - Dumex, Mead Johnson, Abbott, Wyeth and Nestle - occupy more than 50 percent of the Chinese market, according to the latest data from market research firm ACNielsen. These brands have all raised prices since the 2008 milk scandal on the grounds of rising production costs driven by higher quality and nutrition standards. Industry analysts see little space for further price increases, however.

"Even if Mead Johnson confirms a price hike, it would be more likely a move in some parts of the country instead of a nationwide hike," said Song Liang, an analyst at the Distribution Productivity Promotion Center of China Commerce.

"We are unlikely to see a pan-industry price hike and prices of milk powder products are also less likely to continue an upward trend," Song noted, citing factors including growing competition in the market and the Chinese government's decision to cut tariffs on infant milk powder to an average 4.4 percent from this year.

Manufactures always try to find excuses to raise prices, but the costs of imported milk powder have seen no obvious change, said Wang Dingmian, president of the Guangzhou Dairy Association.