Fonterra reacts to China price probe

New Zealand's largest milk product exporter, Fonterra, is cutting prices on its Anmum milk product brand in China amid a Chinese investigation into high domestic prices of infant fomula.

It has been reported that high prices charged by companies including Nestle, Danone and Mead Johnson Nutrition have been the subject of a National Development and Reform Commission (NDRC) in China.

The NDRC is a macroeconomic management agency with wide administrative and planning control over the Chinese economy.

Fonterra president of Greater China and India Kelvin Wickham said the group would cut prices by 9 per cent on its Anmum maternal health products sold in China in light of recent industry-wide price revisions.

"We are committed to providing high quality, premium imported products to Chinese consumers and we are also committed to being an integral part of and long-term partner to the Chinese dairy industry," Wickham said.

The price reduction for Anmum Materna would be effective from August 1. The Anmum brand included formulated milks for women during pregnancy and while breastfeeding.

Fonterra doesn't directly sell infant formula in China, an important growth market for dairy companies and one of the world's largest for infant formula.

It has also been reported that Danone, Netherlands-based Royal FrieslandCampina and Nestle's Wyeth brand have been reviewing prices within the Chinese infant formula market.

South Island milk product exporters into China are yet to see any impact on prices.

Westland Milk Products and Synlait Milk both produce a variety of products for the Chinese market including milk powder, butter and infant-related products. But so far it appears it is the larger multinational firms that are being targeted by the authorities. 

Westland Milk Products chief executive Rod Quin said his company continued to export to China as it had for 10 years, and had not been directly affected by the pricing issue. He was aware, however, of the pricing issue having an impact on the multinationals.

"The (New Zealand) industry is very aware of any change in the Chinese regulation," Quin said.

"In this regard though I'm not sure it's a change in regulation, rather a decision by the Chinese government to (provide) incentive to manage prices down, obviously with a view to say that they think the market for infant formula has become overheated."

He also noted recent commentary from China with regard to the quality of milk products and issues around making sure Chinese consumers got what they paid for.

Synlait Milk chairman Graeme Milne was not aware of any impact on Synlait from changes in the Chinese regulatory environment. However, he had yet to be updated by his executive team.

Chinese company Bright Dairy and Food Co has a cornerstone stake in Synlait Milk.

Synlait tended to supply the Chinese market on a business-to-business model, meaning it supplied other companies whish in turn supplied branded products into shops, Milne said.

"We're not involved at the retail end," he said.

"We manufacture business-to-business, the (other companies) do their own retail marketing."

The Press