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Infant Formula Shortage in Australia Tied to Chinese Hoarding Chinese Safety Concern Empties Distant Shelves
(about 20 hours later)
SYDNEY, Australia — A surge in the sales of one of Australia’s most popular brands of infant formula has led to a bizarre sight for any wealthy, first-world nation: barren shelves in the baby aisle and even the rationing of baby food in some of the country’s leading retail outlets. SYDNEY, Australia — A surge in sales of one of Australia’s most popular brands of infant formula has led to an unusual sight for this wealthy nation: barren shelves in the baby aisle and even rationing of baby food in some leading retail outlets.
But the run on sales is not the result of a local baby boom. Instead, it is being blamed on Chinese visitors who, apparently concerned over domestic food safety standards, are believed to be buying in bulk and carrying it home any way they can manage. But the run on formula is not the result of a local baby boom. Instead, it is being attributed to Chinese visitors, who are apparently concerned about domestic food safety standards and are believed to be buying in bulk and carrying it home.
The run is one of the odder examples of how China’s thirst for quality products can upend faraway consumer markets, particularly, in this case, amid concerns about the quality of the nation’s food supply. The run is one of the odder examples of how China’s thirst for high-quality products can upend faraway consumer markets, particularly amid concerns about the quality of its food supply.
A number of recent high-profile scandals involving tainted food products in China have seriously shaken public confidence in the safety of domestic supplies. In 2008, two Chinese milk producers were executed for selling more than 3 million pounds of contaminated milk powder, after infant formula and other milk products were found to have contained the industrial chemical melamine. Six children died and some 300,000 became ill in that incident, which caused a nationwide panic among parents. A number of recent high-profile scandals involving tainted food products in China have shaken public confidence in the safety of domestic supplies. In 2009, two Chinese milk producers were executed for selling contaminated milk powder after infant formula and other products were found to have the industrial chemical melamine. Six children died and about 300,000 became ill, provoking a nationwide panic among parents.
And last June, China’s largest dairy, Inner Mongolia Yili Industrial Group, was forced to recall six months’ worth of production in June of last year. Last June, China’s biggest milk producer, the Inner Mongolia Yili Industrial Group, was compelled to recall six months’ worth of production.
With Chinese visitors to Australia hitting record numbers in 2012, local merchants say it is common for these travelers to stock up on formula before leaving. With about 16 million births a year, China is one of the world’s largest markets for baby food and infant formula, representing around 23 percent of the $41 billion global market, according to a recent study published by Euromonitor International, a research firm in London.
“This has been happening for maybe five years,” Edward Karp, the owner of Pyrmont Pharmacy in Sydney, said in an interview on Friday. “Their pilots and their flight attendants used to stay at the hotel in the other block and they used to come in and buy cartons of baby formula to take back home for their family and friends. They used to come in in the uniforms with the trolleys, put the bags on the trolleys and off to the airport they’d go.” Concerns about the safety of domestic supplies have led to a sharp rise in demand for imported formula among urban middle-class households, sending prices of foreign brands soaring in Chinese supermarkets. According to the United States Department of Agriculture, the retail price of a 28-ounce package of imported formula is 290 to 350 renminbi, or $46 to $56 — about 50 percent higher than most domestic brands.
The shortages are limited primarily to the Karicare Aptamil Gold brand of formula, which is produced by a New Zealand-based subsidiary of French food-product giant Danone. It remains unclear why this particular line is in greater demand than other locally produced brands of formula, but Australia’s leading supermarket chains, Coles and Woolworth’s, admitted this week that they were struggling to meet demand. Hoping to stem the loss of market share to foreign competitors — and perhaps to reap the higher margins on foreign milk — some Chinese producers are investing in plants overseas. One of China’s leading makers of baby formula, Synutra International, announced plans in September to invest about $130 million in a new milk-drying plant in the western French region of Brittany that will be operated by Sodiaal, a French dairy cooperative.
A spokeswoman for Woolworth’s, speaking on condition of anonymity in line with company policy, said that while the chain had not instituted formal rationing, it would restrict the amount that customers may buy at any one time. The plant, which is expected to open in 2015, will produce around 100,000 tons of “high-quality” whey and milk powder a year exclusively for Synutra, the company said.
“Woolworth’s is not a wholesaler, we reserve the right to limit the number of identical products any one customer can buy during a single visit,” she said in an emailed response to questions. “While there is no specific limit set, our stores are encouraged to use a common sense approach to ensure stock is only sold in retail quantities.” With Chinese visitors to Australia reaching record numbers in 2012, local merchants say it is common for these travelers to stock up on formula.
Alistair Bradley, the General Manger of Nutricia, which produces the formula at its New Zealand factory, told The Australian newspaper on Friday that the company was struggling to keep its products on the shelves, despite having increased production from 5,000 to 20,000 tons in 2012 to cope with growing domestic demand. “This has been happening for maybe five years,” Edward Karp, who owns Pyrmont Pharmacy in Sydney, said in an interview. “Their pilots and their flight attendants used to stay at the hotel in the other block, and they used to come in and buy cartons of baby formula to take back home for their family and friends. They used to come in in their uniforms with the trolleys, put the bags on the trolleys, and off to the airport they’d go.”
“This, coupled with food safety concerns overseas, has generated an unexpected increase in demand for Karicare and Aptamil formula,” he said. “We are currently not always able to ensure that adequate amounts” are available at local stores,” he added. The phenomenon is not unique to Australia. Mainland Chinese visitors to Hong Kong, for example, have put such pressure on formula supplies that retailers routinely limit purchases to four cans per customer, analysts say. Thousands of Chinese households are also placing international orders for formula online, either directly or through friends and relatives living overseas.
The shortages were apparent during random visits to 10 pharmacies and supermarkets across Sydney on Friday and Saturday. The shortages in Australia are primarily limited to the Karicare Aptamil Gold brand of formula, which is produced by a New Zealand-based subsidiary of the French food-product giant Danone. It remains unclear why that brand is in greater demand than others, but Australia’s leading supermarket chains, Coles and Woolworths, acknowledged this week that they were struggling to meet demand.
At a large IGA grocery store near the Star City casino and hotel complex, which caters heavily to Chinese tourists, the shelves were completely empty of the brands in question, their price tags replaced with small white signs reading: “This line is temporarily unavailable. We apologize for any inconvenience.” The manager declined to comment on the cause of the shortage. A spokeswoman for Woolworths, speaking on the condition of anonymity in line with company policy, said that while the chain had not instituted formal rationing, it would restrict the amount that customers may buy at any one time.
In Perth, some 3,000 miles away on Australia’s west coast, Richard McWatt, the manager of the Superchem Family Pharmacy there, said in a telephone interview on Saturday that a customer had called him Thursday to buy 100 cans of the formula. Similar stories have been reported widely in the Australian press, although it is unclear how the products are being taken out of the country without the imposition of export duties. “Woolworths is not a wholesaler; we reserve the right to limit the number of identical products any one customer can buy during a single visit,” the spokeswoman said in an e-mailed response to questions. “While there is no specific limit set, our stores are encouraged to use a common-sense approach to ensure stock is only sold in retail quantities.”
“Some families will buy six tins at a time and send it back to their home country, but never that many at one time,” he said. Additionally, some of the purchases could be the result of hoarding by local residents fearful of shortages. Alistair Bradley, the general manager of Nutricia, which produces the formula at its New Zealand factory, told the newspaper The Australian on Friday that the company was struggling to keep its products on the shelves, despite having increased production to 20,000 tons from 5,000 in 2012 to cope with growing domestic demand.
Despite the shortages, many Australian parents are making do fine. At a shopping center in Sydney’s trendy Surry Hills neighborhood, Rupert Maloney, 31, a financial analyst and father of a three-month-old son, was anxiously perusing the baby care aisle on Saturday morning. He was not, however, concerned about the shortages of Karicare. “This, coupled with food safety concerns overseas, has generated an unexpected increase in demand for Karicare and Aptamil formula,” he said. “We are currently not always able to ensure that adequate amounts.”
“We actually get organic stuff, so we don’t get that,” he said, as he stared at the store shelves. In Perth, on Australia’s west coast, Richard McWatt, the manager of the Superchem Family Pharmacy, said by telephone that a customer had called him on Thursday to buy 100 cans of the formula. Similar stories have been reported in the Australian news media, although it is unclear how the products are being taken out of the country without the imposition of export duties.
“Some families will buy six tins at a time and send it back to their home country, but never that many at one time,” Mr. McWatt said.
Some of the purchases, though, could be the result of hoarding by residents fearful of shortages.

Nicola Clark contributed reporting from Paris.