Chinese government places new limits on infant formula makers

Beijing seeks to curb influence of powdered milk companies in hospitals and promote breastfeeding among country's mothers

PUBLISHED : Tuesday, 29 October, 2013, 8:45pm
UPDATED : Thursday, 31 October, 2013, 8:45am

Beijing has intensified its crackdown on medical staff and tightened advertising rules for the infant-formula industry as companies including Danone face allegations they paid bribes to boost sales.

The central government had "strictly banned" hospitals from receiving benefits from baby-formula makers and would require hospital staff to retain receipts for milk powder products purchases, according to an official statement yesterday.

Baby-formula makers are also required to emphasise the benefits of breastfeeding in their labelling, it said.

Beijing is tightening regulations on the infant-formula market after food safety concerns and bribery and price-fixing claims prompted the authorities to overhaul the industry that is expected to expand more than 70 per cent to 134 billion yuan (HK$169 billion) by 2015.

Authorities are banning baby-milk companies from marketing in hospitals and medical staff from promoting these items to pregnant mothers and their families. Hospitals will also strongly promote breastfeeding to mothers, according to the statement issued jointly by the China Food and Drug Administration, the National Health and Family Planning Commission and State Administration for Industry & Commerce.

The World Health Organisation recommends breastfeeding babies exclusively for the first six months and says promoting formula can undermine young children's health by misleading mothers into thinking it is the healthier alternative.

Global baby nutrition companies have faced roadblocks in expanding on the mainland this year. At the request of the US Securities and Exchange Commission, Mead Johnson Nutrition said this month it started an investigation into whether bribes were paid by its Chinese unit, in violation of domestic and US law. Mead Johnson, China's largest baby formula company by market share, gets almost a third of sales from China.

Danone's Dumex baby nutrition unit also said this month it would take disciplinary measures and strengthen corporate governance after a government body and state media accused it of paying doctors to drum up sales. An official investigation found 116 employees in 85 medical institutions had broken rules since 2011 and accepted payments from the French formula maker, according to officials in Tianjin .

The Paris-based company, which also sells its Nutricia formula on the mainland, has cut its full-year forecasts after a product-safety scare and regulatory problems on the mainland slowed sales growth. Mead Johnson and Danone were among the six dairy companies fined in August for price fixing and violating anti-monopoly laws.

The mainland is looking to consolidate its baby formula industry to raise product standards amid food safety concerns and aims to groom as many as five local companies with sales of more than five billion yuan by the end of 2018, the China Securities Journal reported in August, citing unidentified people.

The government is also requiring domestic infant milk producers to own their milk sources.

Consumers' distrust of local milk has driven them to source for products overseas or turn to foreign brands after milk powder tainted by the chemical melamine killed six infants on the mainland in 2008.

Mead Johnson is ranked first in China's milk-formula market with a 14 per cent share last year and Hangzhou Beingmate was No2 with 10 per cent, according to researcher Euromonitor International. Danone was third with a 9.2 per cent market share.

Beijing is cracking down on possible misbehaviour by companies.

In July, four senior GlaxoSmithKline executives were accused of crimes involving three billion yuan tied to spurious travel and meeting expenses as well as trade in sexual favours.

Alcon, the eye-care division of Novartis, said that it was investigating reports its mainland employees paid doctors to boost sales.