Chinese thirst for formula spurs rationing

Customs officers monitor baggage checking at a border crossing point with mainland China in Hong Kong on March 1, 2013.

Story highlights

  • Chinese demand for foreign-made baby formula has forced rationing in some UK and Australian supermarkets
  • Overseas manufactured milk is selling online for Rmb150 to Rmb200 ($24 to $32)
  • Production of formula is also under pressure due to a severe drought in New Zealand

Supermarkets as far afield as the UK and Australia have been forced to ration infant formula due to rampant Chinese demand for foreign-made baby milk.

Mainland Chinese buyers have been snapping up cans of formula across the globe following safety scandals in the domestic market, starting with the melamine-spiked milk of 2008 that killed six babies and left 300,000 sick.

Voracious demand for overseas-manufactured formula -- Chinese babies are expected to slurp their way through $14.5bn worth of milk powder this year -- has prompted a wave of smuggling rings and entrepreneurial escapades: cans are available online for Rmb150-Rmb200 ($24-$32).

Production of formula is also under pressure, as a severe drought in New Zealand -- the biggest provider in the global dairy trade -- forces up the cost of raw milk powder. The New Zealand price, a proxy for Asia-Pacific, was 30 per cent higher month-on-month in March.

The frenzy for formula has forced governments to step in. Hong Kong, where shelves of formula are regularly cleared by mainland visitors, introduced curbs at customs in February. Smugglers have been arrested for carrying more than 1.8kg out of the city.

Australia's baby formula shortage
Australia's baby formula shortage

    JUST WATCHED

    Australia's baby formula shortage

MUST WATCH

Australia's baby formula shortage 01:36

The effects in Hong Kong have been felt well beyond the supermarket shelves. The frenzy is changing the face of the city's streets, say property analysts, as pharmacies replace clothes shops and noodle joints. Some travel agents have even directly linked rising flight prices to certain destinations -- such as Australia -- to the rising number of mainland tourists stocking up on milk powder.

This month UK supermarket chains such as Wm Morrison, J Sainsbury, Asda and Tesco began restricting customers to two tins of infant milk formula at a time.

"This is being done at the request of the manufacturers, who believe it's possible that some organised groups of customers are buying up products in unusually large quantities for export," said Richard Dodd, of the British Retail Consortium.

Jo Newbould, spokesperson for the Asda supermarket chain, said, "We have been asked to implement a two per customer cap by our baby milk supplier, Danone."

Danone has taken steps to prevent profits being re-routed into smugglers' hands by introducing official sales of Dutch-made formula on Chinese online platform TMall .

The French food producer said the cap on sales to individual shoppers in the UK was designed "to prevent ... bulk-buying baby milk for commercial purposes. We understand that the increased demand is being fuelled by unofficial exports to China to satisfy the needs of parents who want western brands for their babies."

There are numerous sellers on Taobao, an online marketplace which similar to TMall is run by Alibaba, the Chinese ecommerce group, selling European-made baby milk to customers in China.

The restrictions in the UK have provided some students with extra spending money and created angst for mothers: "Why is china buying so much all of a sudden?" posted wannabedomesticgoddess on the Mumsnet forum, a repository of middle class motherhood, in a chat thread entitled," should i panick [sic] buy baby milk?"

Additional reporting by Josh Noble in Hong Kong and Neil Hume in Sydney

        CNN Business

      • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

        Why are Iraq oil markets stable?

        Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
      • A view of gloves and boots used by medical staff, drying in the sun, at a center for victims of the Ebola virus in Guekedou, on April 1, 2014. The viral haemorrhagic fever epidemic raging in Guinea is caused by several viruses which have similar symptoms -- the deadliest and most feared of which is Ebola. AFP PHOTO / SEYLLOU (Photo credit should read SEYLLOU/AFP/Getty Images)

        Ebola's economic 'scare factor'

        The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
      • People enter a casino in Las Vegas, Nevada, on April 18, 2009. Las Vegas is the most populus city in the US state of Nevada and internationally renowned major resort city for gambling, shopping, fine dining and entertainment. Las Vegas which bills itself as the �Entertainment Capital of the World� is famous for the number of casino resorts and associated entertainment. AFP PHOTO/Jewel SAMAD (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

        Casinos beat the banker

        Macau has overtaken Switzerland in the wealth stakes, being named the world's fourth richest territory by the World Bank.
      • spc marketplace middle east ata atmar a_00010015.jpg

        Bateel's new bakery venture

        Saudi Arabian Bateel brand is best known for its delectable dates but it now has more than a dozen cafes and a new bakery in the works.
      • Vantablack designed by Surrey NanoSystems absorbs 99.96% of all light. It however will not be the solution to the creating the world's ultimate slimming black dress! A dress made out of this material would render the curves and contours of the human body invisible and would leave the wearer looking like 'two dimensional cardboard cut-out.'

        Is this the real new black?

        A British nanotech company has created what it says is the world's darkest material. It is so dark the human eye can't discern its shape and form.
      • Move over Siri, here comes Jibo

        Jibo robot is designed to be an organizer, educator and assist family members. CNN's Maggie Lake met him and says she was impressed with his skills.
      • A picture taken on March 15, 2014 shows children playing at the sprawling desert Zaatari refugee camp in northern Jordan near the border with Syria which provides shelter to around 100,000 Syrian refugees. Syrian refugees in the seven-square-kilometre (2.8-square-mile) Zaatari camp in Jordan fear that President Bashar al-Assad's likely re-election this year will leave their dream of a return home as distant as ever. The brutal war in Syria between the regime and its foes shows no sign of abating and has killed at least 146,000 people since it erupted in mid-March 2011. And 2.5 million Syrians have fled abroad and another 6.5 million have been internally displaced. Jordan is home to more than 500,000 of the refugees.

        Jordan: Seeking calm in chaos

        Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
      • SHEFFIELD, ENGLAND - NOVEMBER 18: Queen Elizabeth II wears 3 D glasses to watch a display and pilot a JCB digger, during a visit to the University of Sheffield Advanced Manufacturing Research centre, on November 18, 2010 in Sheffield, England. (Photo by John Giles - WPA Pool/Getty Images)

        Forget 3D, it's 4K now

        At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
      • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

        Where is Iraq's oil?

        Iraq produces 3.3 million barrels per day and has the world's fourth-largest oil reserves. But the current crisis is putting all this in danger.
      • Valves of gas pipe-line are seen in the gas station not far from Kiev on March 4, 2014. The European Union will help Ukraine pay the $2.0 billion it owes to Russian gas giant Gazprom, a top official said Tuesday, as part of an aid package reportedly worth more than one billion euros. AFP PHOTO/ ANDREY SINITSIN (Photo credit should read ANDREY SINITSIN/AFP/Getty Images)

        Why Europe needs Russian gas

        The gas standoff between Russia and Ukraine could have a knock-on effect on Europe. Explore this map to find out why is the EU nervous.