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So will China's milk powder fines hurt?

Wednesday, August 07, 2013 - 01:23

Aug 7 - China has fined six companies including Mead Johnson Nutrition Co, Danone and New Zealand dairy giant Fonterra a total of $110 million after an investigation into price fixing by foreign baby formula makers. Edward Baran reports.

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China's decision to fine six foreign baby milk manufacturers $110m is the latest development in an investigation into price fixing and anti-competitiveness. China says it's a record amount but none of the companies shares suffered too much - in fact most went up . Foreign infant formula is much in demand in China - it accounts for half total sales in a market set to top 25 billion dollars by 2017. Western baby milk can sell for double the price of local products. And some believe the fines could be a ploy by China to boost local consumption. They certainly won't be as damaging as the health scare involving New Zealand dairy giant Fonterra. Human error resulted in some of its products being contaminated with a botulism-causing bacteria. It's led to a raft of recalls and confusion for Chinese consumers. SOUNDBITE, Zheng Zhiqing, grandfather, saying (Mandarin): "Domestic brands are no good, and now foreign brands are no good either. I have no idea how to choose." David Mahon, from Mahon China Investment Management, says Fonterra has a big challenge ahead. SOUNDBITE, David Mahon, Managing Director of Mahon China Investment Management Ltd, saying: "I think there are many, many weeks and months where New Zealand has to repair the perception of the integrity of its clean, green image, it's claim of being '100 percent pure' Other firms may benefit from Fonterra's plight. And none of the fined diary companies is planning to appeal. Some believe the action could even make their products more desirable.

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So will China's milk powder fines hurt?

Wednesday, August 07, 2013 - 01:23