Milk formula suppliers win from government hotline sales

Infant formula makers get greater profits, earning an extra HK$20 per tin, as taking orders by phone cuts out the retailers

PUBLISHED : Wednesday, 06 February, 2013, 12:00am
UPDATED : Wednesday, 06 February, 2013, 9:27am

Makers of milk formula are likely to emerge the biggest winners under the government's plan to ensure supplies to local mothers.

An estimate by the Post found they made at least an extra HK$100,000 in just four days.

Last week, the government said people departing Hong Kong would be limited to taking two cans, or 1.8kg, of milk powder in the latest effort to crack down on trading by mainlanders that has led to shortages in the city.

But a 24-hour hotline set up by the government last Friday to take local orders has been criticised by lawmakers for allowing suppliers to cash in by skipping the retail level.

"The suppliers should redeem the total cost of the telephone service to the government", said Helena Wong Pik-wan, a Democratic Party lawmaker. "It is unreasonable that taxpayers should bear the cost of a system that allows manufacturers to do business."

A tin of Mead Johnson stage 1 formula is being supplied to stores at around HK$280, with a suggested selling price of HK$298.

But the hotline allows makers to receive direct orders from customers - so suppliers earn an extra HK$20 on each tin.

As a total of 2,500 orders were place through the hotline, and assuming each order is for two tins, the manufacturers have made at least an extra HK$100,000 in just four days. Secretary for Food and Health Dr Ko Wing-man said he was concerned whether suppliers had forced pharmacies to take less popular milk powder in bundled sales with the products in demand.

One pharmacy owner said: "The amount of stock we receive is decided by the suppliers. As we are out of stock, we have to accept everything they arrange."

The owner has 50 boxes, or 600 tins, of Friso stage 4 formula in storage, but he says it is unpopular as children at this stage can eat normal food.

He was forced to buy them in a package to get Frisco stage 1 to 3, which is often in short supply.

Both Friso and Mead Johnson rejected accusations of sales bundling. Friso said the amount of supply provided to retailers was based on market needs.

The Consumer Council expressed concern at sales bundling. It said such tactics would drive out smaller competitors and narrow the choice of consumers.

Figures show that prices for formula have been raised several times in recent years. Mead Johnson's prices have increased 40 per cent in five years.

People Power legislator Albert Chan Wai-yip suggested some parties in the supply chain may have taken advantage of the parallel-goods trading by mainlanders. He urged the government to investigate the source of the scarcity and find out which parties had benefited.