A formula for volatility
Updated: 2011-03-08 07:04
By Michelle Fei(HK Edition)
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Suspected 'couriers', who make a substantial profit by reselling infant milk powder on the mainland at a premium, pack up the powder near an entrance of Sheung Shui MTR station on Feb 25. Edmond Tang / China Daily |
Since before the Chinese New Year, Hong Kong has faced a shortage of infant formula, which owes to heavy purchases by mainland consumers and has left local families frustrated and angry. Michelle Fei reports.
It was Saturday morning. The pharmacy in Sheung Shui was crowded already. A dispute involving two customers over the short supply of baby formula added to the chaos. One shopper was furious.
"I called the pharmacy an hour ahead to reserve two tins of baby formula for me. When I arrived, they told me the last tin had just sold out," said the woman, who lives in Hong Kong and only referred to herself as Mrs Sze. Sze's argument was that the other shopper, who had bought up the last available tins, had exceeded her quota. "This is unacceptable," said Sze. She was upset, angry, adding her 6-month-old baby girl would run out of formula in the next day or two.
"It's been hard to buy milk powder in pharmacies and supermarkets since Spring Festival. Mainland visitors are everywhere. They've bought large quantities of milk powder," said Sze. Things are bad enough that it seems she's never able to buy supplies by visiting just one shop. It always takes at least two places - pharmacies or supermarkets.
Sze got up early this Saturday and hurried out to buy baby formula. The shelf at the first pharmacy on her route was already empty by the time she got there. She called another pharmacy where she shops often to reserve a tin of formula.
"Reservation can't save one tin for my baby. Maybe only a higher price would do," Sze said in an angry tone.
Sze's experience exemplifies the scenes that play out again and again over Hong Kong. The shortage of baby formula and rising prices have stirred up a boiling issue over people who cross the border from the mainland and buy up the entire local supply of milk powder.
Wellcome supermarket suffered a big blow to its integrity just Thursday, when it confirmed that three of its employees in an outlet in Sheung Shui were hoarding milk powder under the counter and selling it at a premium to so-called couriers from the mainland, who purchase infant formula and then resell it across the border.
The Independent Commission Against Corruption (ICAC) has set out to investigate the matter, according to Nelson Wong Sing-chi, a member of the Legislative Council, who said he learned of the action from Timothy Tong, the ICAC commissioner.
Wong also said Wellcome is not the only supermarket under investigation, saying some stores in Taikoo Shing, Sha Tin, Tseung Kwan O have also been suspected.
Prior to the investigation, an undercover investigation at a Wellcome supermarket observed a putonghua-speaking woman buy four tins of milk powder while the shelves where the product is stored normally were empty - and they had been empty for two weeks.
A few minutes later, a journalist posing as a consumer approach the shelf asking to buy infant formula, but was told there was none available owing to a supply shortage.
It took only another three minutes for a second putonghua-speaking woman to approach the counter, where she was able to purchase tins of milk powder. Wellcome's betrayal of its local clientele has been widely reported in Ming Po.
North District in the New Territories, which is adjacent to the border, is most affected by the "milk powder fever". Some pharmacies reportedly sell out all their milk powder in less than 10 minutes after fresh stocks are placed on shelves.
Lau Oi-kowk, chairman of the Hong Kong General Chamber of Pharmacy Limited, said he believes there are two main reasons for the sudden outbreak of "milk powder fever". First, parents who returned to the mainland to observe Spring Festival need to store some food for their babies; second, and more importantly, after series of baby formula scandals on the mainland, cross-border consumers switched their preference to formula purchase in Hong Kong. It was a safety concern. In 2008, tainted milk powder, with a dangerous chemical additive known as melamine, killed several mainland babies and injured more than 6,000. Many infants were afflicted with kidney stones or kidney failure.
Early in 2011, leather-hydrolyzed protein, a toxic substance extracted from leather scraps, was observed in some mainland milk supplies. Like melamine, the leather protein can also be used for cheating on the amount of protein content in the products.
Nonetheless, the Ministry of Agriculture reported on Feb 17 that the quality and safety of fresh milk on the mainland market was "generally safe".
Many parents on the mainland were not satisfied. They stopped buying infant formula on the mainland. That's how "milk powder fever" broke out in Hong Kong.
Where there is a demand, the supply follows. That demand has given rise to the emergency of so-called couriers, or people from the mainland who traffic in milk powder to mainland buyers.
"If the buyer is willing to pay us more money on each tin of milk powder, of course we would love to sell as much as we could, as long as local supply was assured," said Pang Hok-ming, who runs a pharmacy at Sheung Shui.
Usually, "couriers" are "generous". They offer an extra of HK$50 for each tin of milk powder. The couriers later resell at a mark-up of around HK$70 over the Hong Kong retail price, Pang said.
He said he once sold 100 tins of milk powder to one "courier" at a time when he has sufficient supply. "After all, we are running a business," he said.
A recent visitor to Sheung Shui observed that supplies of milk powder in pharmacies and supermarkets in the district appeared virtually exhausted, while boxes of milk powder were easily found in the hands of mainlanders at major public transportation hubs.
"Actually, the same brand of imported milk powder sold in Hong Kong and on the mainland are of identical quality, though the price is lower in Hong Kong," said Lau Oi-kowk. "People paid higher prices just for a safety guarantee."
Lau took Mead Johnson as an example. The company is a major milk powder supplier for Hong Kong. A tin of formula for a baby aged 0 to 6 months old sold for HK$245 at Hong Kong, compared with 245 yuan on the mainland.
"We set a two-tin-per-buyer limit and stopped selling milk powder to suspected 'couriers', to ensure local supply," said Lau, explaining one measure pharmacies have implemented to protect local babies.
"Supply is sufficient now and the fever is slowly fading," said Lau, adding that major local milk powder suppliers had already doubled the product supply since Spring Festival to meet the looming market demand. The price has remained the same.
"The crux of the issue is that, mainland milk powder producers are all food companies, not pharmaceutical companies, they lack the scientific expertise to produce these products under strict quality control," said Wang Mingfu, assistant professor of the School of Biological Sciences at the University of Hong Kong.
Lau added that the quality of the product in Hong Kong and on the mainland is virtually identical. The safety standards are the same. However, Hong Kong imports only milk powders produced by major foreign producers, which are also pharmaceutical companies rather than food companies.
Recently, some Hong Kong parents initiated a campaign on the Internet to urge the government to introduce a milk powder export tax to combat the situation. Macao parents, who suffered a similar milk powder shortage problem, also called for a milk powder export tax.
Secretary for Food and Health York Chow rejected the idea saying he would damage the city's free trade reputation and add complexity to the simple, highly regarded system of taxation here.
Meanwhile, major suppliers had come up with their own solutions. A member-privilege system will be launched soon among Hong Kong mothers. Under the program, two tins of milk powder will be reserved for each member at the pharmacy every week, according to Ho Kit-leung, sales executive of Mead Johnson Hong Kong.
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Baby formula sample tins are exhibited at a pharmacy at Happy Vally. The owner, Lau Oi-kowk, is chairman of the Hong Kong General Chamber of Pharmacy Ltd. Edmond Tang / China Daily |
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Baby formula to be sold at Lau Oi-kowk's pharmacy. Edmond Tang / China Daily |
(HK Edition 03/08/2011 page4)