High profit drives up imported milk powder prices

Imported milk powder to China has risen in price four times at an average rate of 10 percent since 2008 when Sanlu, a Chinese dairy company, was revealed to be selling melamine-tainted milk powder, Economic Information reported Monday, citing figures published by Beijing Orient Agribusiness Consultant, a professional agriculture and food consulting firm.

Currently, the price of a tin of foreign milk powder has grown to between 200 and 400 yuan, said the report.

But at Shanghai Customs in January, a kilogram of imported milk powder was only levied a tariff of 32 yuan. Even with packaging, transport and sales factored in, the cost for a tin of 900-gram milk powder sold in China still falls short of 100 yuan.

The milk powder produced in Australia and New Zealand is three times as expensive in China as in their own countries, some milk powder buyers said.

MeadJohnson, a US-based milk powder producer, has found its gross margin at a stable rate of 63 percent since 2009 while French Biostime said its gross profit topped 70 percent in the 2011 annual.

Industry insiders say the gross profit margin has remained at more than 50 percent for almost all imported milk powder brands in China.

Foreign milk powder started to march into China when the boiling milk powder scandal undermined the credibility of native milk powder producers in 2008, said Zhang Weiyin, general secretary of Heilongjiang Dairy Association.

They have been beating domestic milk powder brands on the strength of constant influx and circulation of profit since then, he added.