More than baby formula — it’s a $1 billion industry

 In 2008, a scandal involving Chinese baby formula drove an increase in demand for safe Australian baby formula. Since domestic products fail to meet health standards, Chinese mothers are forced to buy expensive alternatives which are imported from Australia.

Ever seen buyers in local supermarkets buying baby formula products in bulk? These shoppers are known as Daigou – Those who practice buying on behalf of someone else. Usually orders are sent or negotiated via WeChat then the products are packed shipped to the Chinese buyer.

Foundation behind boom in Infant formula

The crux behind the boom in infant formula stocks over the past year or so is the rise of China, largely thanks to its vast middle class and their rising disposable incomes. Since the abolishment of the One child policy act in 2016, demand has been facilitated by the birth of millions of millennial babies born into these families. Other international factors are also assisting.

Australia’s reputation as a clean producer of high-quality foods is a boon for Australian infant formula producers. This is especially prominent because of the food safety scandal in China in 2008 where locally produced infant formula clearly failed to meet health standards. This resulted in one of the biggest disasters culminating in the death of six babies and thousand more becoming ill.

Another interesting factor commonly known as ‘Little Emperor Syndrome’

explains the situation where the parents and the grandparents contribute to the well-being of the only grandchild. This results in greater purchasing power along with pampering the child by buying expensive products.

What is left for local customers?

There have been several incidents raised by angry Australian shoppers questioning the mass-purchasing of baby formula.Demand for the Australian product has been so high that “Daigou” are swarming local supermarkets and completely cleaning out the stock levels to sell online at prices that are generously inflated.

The supermarkets attempt to enforce limits on the amount each customer can buy. However, crowds of Asian shoppers reportedly just go through the checkout, then return to buy more tins in a different purchase to circumvent the policy. Keen investors have picked up on this trend and are looking to cash in on China’s growing thirst for infant formula.