Baby formula

Milking the system: Vancouver drug addicts recruited to steal baby formula for Chinese market, police say

That precious white powder coveted by Canadian drug addicts? It turns out to have been baby formula, bound for Chinese mothers on the profitable black market

PUBLISHED : Friday, 18 November, 2016, 8:04am
UPDATED : Friday, 18 November, 2016, 9:03pm

Police in Vancouver have busted a theft-and-smuggling racket in which drug addicts were allegedly recruited to steal tens of thousands of dollars’ worth of baby formula to be sold for huge profits in China.

Officers said the scheme was brought down last week with the arrest of a 46-year-old man. Hundreds of containers of milk formula, worth an estimated C$50,000, were allegedly seized from the man’s Vancouver home, a rented apartment and business premises.

The operation is the latest twist in a worldwide phenomenon, in which baby formula is being smuggled to consumers in China who pay a premium for foreign formula because it is perceived to be safer or healthier than domestically available products.

But while most of these schemes typically involve legitimately purchased formula that is bought in bulk then sold onwards via the legally dubious grey market, the Vancouver scheme was allegedly based on outright criminality from the beginning.

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“What’s significant about this case is that it all permeates from the Downtown Eastside, and it’s fuelled by a method we call predatory fencing,” said Detective Doug Fell of the Vancouver Police Department’s anti-fencing unit, in a video statement released on Thursday. He was referring to the neighbourhood that is the epicentre of Vancouver’s hard drug scene and is beset by a host of social problems.

We feel that this individual here was responsible for a minimum of 70 per cent of the baby formula thefts over the last year
Detective Doug Fell

Under such a scheme, Fell said that the mastermind was “preying on the drug-addicted” who were recruited to steal the milk formula to pay for their drugs.

“What we’ve seen from this guy, it was absolutely prolific…we’ve been doing this for about six years now and this is the worst example we’ve seen of it to date,” Fell said.

Fell said that a fence for stolen formula would typically pay thieves about 10 per cent of the face value, then sell it onwards in Canada for about 50 cents on the dollar, representing a 400 per cent profit. But the person behind the latest seizure of formula was able to pay his network of thieves a premium – about 30 cents on the dollar – because he could then sell it in China for upwards of 2.5 times the Canadian face value.

That price, about C$80 or C$90 per container, would represent a potential profit of more than 700 per cent.

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“We feel that this individual here was responsible for a minimum of 70 per cent of the baby formula thefts over the last year,” Fell said.

In a media statement, the Vancouver Police Department said the case was “yet another example of how thieves will steal anything if there is money to be made”.

The department said that it received a tip-off in early October, about a fence who was purchasing large quantities of stolen baby formula, then shipping it to China.

“Investigators with the VPD Anti-Fencing Unit reached out to their loss-prevention contacts in the local retail industry who were able to confirm that they were seeing large losses of baby formula,” the statement said.

“Police were able to quickly identify a suspect, and believe he was directing drug-addicted individuals and others to steal the formula. Detectives determined that after the formula was purchased from the thieves, it was taken to one of three Vancouver locations before being shipped overseas.”

The suspected fence was arrested on November 8, and his vehicle seized. Officers have recommended charges including possession of stolen property, trafficking in property obtained by crime, and counselling to commit an indictable offence.

The man has been released from custody pending the approval of criminal charges.

“Police are expected to recommend further charges against two additional suspects,” the statement said.

Baby formula smuggling for the mainland Chinese market has become a common phenomenon in Hong Kong in recent years, and has spread elsewhere.

In Australia, supermarkets this year introduced per-person buying limits to prevent shelves being stripped of formula by grey-market smugglers. Such sales limits have also been introduced by some stores in Hong Kong, New Zealand and Britain.

Low rates of breastfeeding among Chinese mothers have fuelled demand. China bought 40 per cent of the world’s baby milk formula – a US$18 billion market – in 2014, according to a study in the Lancet medical journal. It projected that by 2019, Chinese demand would surpass 50 per cent of the global market.

Only 16 per cent of urban Chinese women exclusively breastfeed their babies for the World Health Organisation’s recommended six months, according to the National Health and Family Planning Commission. The rate is even lower in Hong Kong: about 2.3 per cent, according to a 2012 study by the Department of Health.