Chinese thirst for formula spurs rationing

Customs officers monitor baggage checking at a border crossing point with mainland China in Hong Kong on March 1, 2013.

Story highlights

  • Chinese demand for foreign-made baby formula has forced rationing in some UK and Australian supermarkets
  • Overseas manufactured milk is selling online for Rmb150 to Rmb200 ($24 to $32)
  • Production of formula is also under pressure due to a severe drought in New Zealand

Supermarkets as far afield as the UK and Australia have been forced to ration infant formula due to rampant Chinese demand for foreign-made baby milk.

Mainland Chinese buyers have been snapping up cans of formula across the globe following safety scandals in the domestic market, starting with the melamine-spiked milk of 2008 that killed six babies and left 300,000 sick.

Voracious demand for overseas-manufactured formula -- Chinese babies are expected to slurp their way through $14.5bn worth of milk powder this year -- has prompted a wave of smuggling rings and entrepreneurial escapades: cans are available online for Rmb150-Rmb200 ($24-$32).

Production of formula is also under pressure, as a severe drought in New Zealand -- the biggest provider in the global dairy trade -- forces up the cost of raw milk powder. The New Zealand price, a proxy for Asia-Pacific, was 30 per cent higher month-on-month in March.

The frenzy for formula has forced governments to step in. Hong Kong, where shelves of formula are regularly cleared by mainland visitors, introduced curbs at customs in February. Smugglers have been arrested for carrying more than 1.8kg out of the city.

Australia's baby formula shortage
Australia's baby formula shortage


    Australia's baby formula shortage


Australia's baby formula shortage 01:36

The effects in Hong Kong have been felt well beyond the supermarket shelves. The frenzy is changing the face of the city's streets, say property analysts, as pharmacies replace clothes shops and noodle joints. Some travel agents have even directly linked rising flight prices to certain destinations -- such as Australia -- to the rising number of mainland tourists stocking up on milk powder.

This month UK supermarket chains such as Wm Morrison, J Sainsbury, Asda and Tesco began restricting customers to two tins of infant milk formula at a time.

"This is being done at the request of the manufacturers, who believe it's possible that some organised groups of customers are buying up products in unusually large quantities for export," said Richard Dodd, of the British Retail Consortium.

Jo Newbould, spokesperson for the Asda supermarket chain, said, "We have been asked to implement a two per customer cap by our baby milk supplier, Danone."

Danone has taken steps to prevent profits being re-routed into smugglers' hands by introducing official sales of Dutch-made formula on Chinese online platform TMall .

The French food producer said the cap on sales to individual shoppers in the UK was designed "to prevent ... bulk-buying baby milk for commercial purposes. We understand that the increased demand is being fuelled by unofficial exports to China to satisfy the needs of parents who want western brands for their babies."

There are numerous sellers on Taobao, an online marketplace which similar to TMall is run by Alibaba, the Chinese ecommerce group, selling European-made baby milk to customers in China.

The restrictions in the UK have provided some students with extra spending money and created angst for mothers: "Why is china buying so much all of a sudden?" posted wannabedomesticgoddess on the Mumsnet forum, a repository of middle class motherhood, in a chat thread entitled," should i panick [sic] buy baby milk?"

Additional reporting by Josh Noble in Hong Kong and Neil Hume in Sydney