China investigating Fonterra pricing

Last updated 12:23 06/07/2013

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Chinese regulators have launched an investigation into Fonterra and the pricing of baby formula feed, the Wall Street Journal reports.

Fonterra was said to be cooperating. /p>

WSJ says the Chinese National Development and Reform Commission had begun reviewing a wide range of consumer businesses in the Chinese dairy industry and that Fonterra wasn't being singled out.

Fonterra doesn't directly sell infant formula in China, and it wasn't clear if the formula probe and the Fonterra investigation were part of the same effort.

China is an important growth market for dairy companies and one of the world's largest for infant formula.

Sales of dairy products are expected to climb to US$46.5 billion (NZ$60.3 billion) by 2016, up 66 per cent from 2011.

Foreign formula brands have been in particularly high demand following a 2008 scandal in which the industrial chemical melamine was added to milk powder, killing six infants and making 300,000 others ill.

Fonterra had owned a stake in one of the Chinese companies at the centre of the scandal.

In the wake of news over the infant-formula investigation, France's Danone, which sells New Zealand sourced infant formula, said Thursday that it would reduce its formula prices in China.

Switzerland's NestlE SA said it would lower prices on its Wyeth Nutrition line of baby products an average of 11 per cent and freeze prices on all new products for the next year.

WSJ says prices are a sensitive issue in China, where consumer inflation has been a persistent problem, a byproduct of years of torrid growth. The government often damps prices on a wide range of goods—from energy to cooking oil.

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