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Foreign baby milk producer cries ‘foul’ over profit claims
The multinational firm Mead Johnson Nutrition has denied that it is selling baby formula in Vietnam at overly high prices. This is for the first time a foreign producer has taken on the charges of critics here.
Six days after Ho Chi Minh City inspectors released a report charging that sellers’ greed in the reason the retail prices of baby milk formula products are sky high, the multinational firm, Mead Johnson – whose ‘Enfa’ brand products were prominently mentioned – has denied the charges.
Mead Johnson Vietnam’s General Director Mark Hely on July 1 called information in the report ‘not true’ and ‘not truly reflecting reality.’
The inspectors took the stance that markups on products like Enfagrow A+ and Mama A+ are inordinately high. For Enfagrow A+, for example, they cited a markup over cost to the Vietnamese distributor of 76 percent, and the distributor’s additional markup that brought the retail price to 143 percent higher than cost.
The inspectors pointed out that the retail prices are high because suppliers spend heavily on marketing and advertisement campaigns.
Hely explained that the profit margin calculated by the inspectors did not reflect all the expenses Mead Johnson has to bear when doing business in Vietnam which include the spending on operations, distribution, transport, advertisement and especially taxes of different kinds.
“All these kinds of tax reduce our profit,” he said, adding that the company also has to pay for training and nutrition product development.
The Mead Johnson manager denied that the Vietnam subsidiary’s spending on advertising accounts for 54 percent of its total expenses. He cited the conclusion of a well known market survey company in HCM City as saying that Vietnamese companies also bear heavy advertising costs, no less than foreign companies, especially when they launch new products into the market.
A reason that led to the inaccurate information, according to Hely, is that the inspectors compared the purchase and sale prices at two different times 10 months apart.
He said that a glass of high quality baby milk with high nutritional values costs 16,000 dong, even less than the price of a bowl of pho in Hanoi and HCM City.
Local newspaper VNExpress conducted a quick survey on July 2 and found out that though foreign made dairy products cost two or three times more than domestic products, Vietnamese consumers still prefer foreign products.
VNExpress found baby formula Dielac Alpha, marketed by Vinamilk, sells for 60,000 dong per 400 gram carton. A ‘Dutch Lady’ product also manufactured in Vietnam is also 60,000 dong, while competitors ‘Enfagrow’ of Mead Johnson and ‘Gain Advance’ of Abbott are selling between 135,000-149,000 dong per 400 gram carton.
Luu Thi Van Yen, an HCM City mother, said that she feeding her one year-old with foreign made powdered milk, even though her family is not well-to-do. Yen said that at first she fed her child with domestic dairy products, but the products did not seem to fit his taste.
“I know that foreign made products are much more expensive than domestic products, but when I feed my son with foreign products, my mind’s at ease” she said.
Another Saigon mother, Xuan Huong, said that she has read newspaper stories which said that the quality of domestic baby milk products is the same as foreign products and that foreign made products are overly dear. However, she still purchases foreign made products for her son. “You get what you pay for. I cannot change my mind,” she said.
Dairy shop owners in HCM City have confirmed that high prices have appreciably slowed the sales of foreign baby milk products.
The owner of a shop in District 3 said that the foreign products have been selling well these days. Meanwhile, Anh Thu grocery on February 3rd Street have reported small decrease in sales with only 12 cartons of milk selling per day now instead of 13-18.
Do Ngoc Chinh, Deputy Director of the Centre for Consumption Consultancy and Research, said that concerned agencies need to examine the nutrition content of foreign-made products to find out if the products have substances that can improve brain development and growth as advertised by foreign producers.
Chinh also said that if there are any brands that dominate the market (hold more than 30 percent of the market share), measures to control prices. The HCM City authorities have proposed the Government to put foreign-made infant dairy products into the list of products that need to register prices with to management agencies.
VietNamNet, VNE
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