tuesday, 17 september of 2013

Danone´s Dumex probes its infant-formula marketing in China

"The First Drink of Milk"

Danone's Dumex probes its infant-formula marketing in China

Dumex Baby Food Co., a subsidiary of France's Danone SA, is launching a probe of its infant- formula marketing after China's state broadcaster alleged the formula maker pays hospital staff to use its products and influence sales.

In a 20-minute broadcast Monday—under the headline "The First Drink of Milk" —China Central Television said formula makers are paying hospital staff across the nation to feed newborns infant formula before their mothers have an opportunity to breast-feed them. The report said that the practice undermined breast-feeding, saying that a newborn who tastes infant formula first is more likely to reject breast milk.

The report spoke broadly about formula companies but named Danone's Dumex, alleging that the company gives cash to doctors and nurses in hospital maternity wards so that it can increase its sales and market share in China.

A spokeswoman for Danone said the company is "shocked by the CCTV report" and is investigating the situation. Dumex "strictly adheres to Chinese laws and regulations," the spokeswoman said, noting that the company has a strict code of conduct, including severe punishment for employees who violate company regulations and Chinese law.

Infant-formula makers have been under scrutiny in China, where regulators cracked down this summer on milk-powder companies, launching probes into the sales of mostly foreign companies and ultimately fining makers such as Mead Johnson Nutrition Co.'s China unit, Abbott Laboratories and Danone for alleged anticompetitive practices.

Danone and other companies responded by reducing prices of some products sold in China. The country is an important market for infant-formula makers, with sales having hit 77.86 billion yuan ($12.72 billion) in 2012, up 26% from a year earlier, according to market-research firm Euromonitor International.

Chinese state-run media has in recent months ramped up criticism of foreign baby formula, particularly after New Zealand's Fonterra Cooperative Group Ltd., the world's largest dairy exporter, warned in August that some of its products, including infant formula, may have contained hazardous bacteria. The company said later that testing revealed that the products in question were safe for consumption.

China's leaders are aiming to turn around the country's dairy industry, which has floundered since 2008, when domestically produced milk powder tainted with an industrial chemical killed six infants and sickened 300,000 others.

The scandal sparked a surge in demand for foreign baby formula. Last year China imported $1.05 billion in food ingredients for infants, more than four times the amount imported in 2007, according to the Global Trade Atlas database.

Many within the country are also trying to promote breast-feeding in China, which has rates far lower than those in many other countries. Globally, nearly 40% of infants younger than six months are breast-fed, while in China that figure is just 28%, according China's Ministry of Health. Rates in India and the U.S. are about 46%, while the U.K. is among the highest at 84%, according to Unicef and the U.S. Centers for Disease Control and Prevention.

CCTV's report said hospital workers don't ask for parental consent before feeding formula to the newborns. The report said that companies such as Dumex directly deposits cash rewards into individual doctors' and nurses' accounts. Sales representatives are prompted to pay hospitals because of intense competition in the market, the report said.

Chinese law prohibits infant-formula makers from marketing products in hospitals or providing payment to hospital employees.

The report likened the practices of infant-formula makers to authorities' allegations that pharmaceutical company GlaxoSmithKline PLC paid doctors to boost sales of its drugs. China's Ministry of Public Affairs launched this summer an investigation of Glaxo's operations in China. Glaxo says it is cooperating with authorities in the investigation.

(Published by WSJ - September 16, 2013)

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