Saturday, 13 May 2017

Aggressive Marketing & Premium Branding driving up formula milk prices

Costly baby milk in Singapore force parents to buy in Malaysia
susu
The Competition Commission of Singapore criticises formula milk companies for aggressive marketing, including inducements to hospitals to promote their products

Hit by the exorbitant price of infant milk formula in Singapore, an increasing number of parents in the island republic are purchasing the item across the causeway in Malaysia.

According to an article in the South China Morning Post (SCMP) yesterday, the average price of a tin of baby milk has increased by 120% over the past decade in Singapore, making it among the most expensive in the world, surpassing even Hong Kong.

It said a 900-gramme tin of Similac Stage 1 formula milk costs about RM184 in Singapore compared to RM166 in Hong Kong.

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WHY SINGAPOREANS BUY BABY MILK FORMULA IN MALAYSIA
The price of milk formula in Singapore has shot up over the last decade. Photo: AFP
The average price for a tin in Singapore has shot up 120% in the last decade, forcing families to take drastic measures to save money

ONCE A MONTH, Singaporean Siti Norindah crosses the border into southern Malaysia with only one item on her shopping list: baby milk formula.

She grabs eight to 10 tins at a time for her three children, aged between one and four, grateful that the currency exchange rate is heavily in her favour.

With the Singapore dollar at a record high against the Malaysian ringgit at S$1 to 3.08 ringgit (HK$5.52), the savings for the administrative executive are substantial. A tin that would set her back S$86 at home costs only half the price in Malaysia.

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Expensive formula milk: by choice or no choice?

The main factors behind the price hike, says the CCS, are the heavy investment in marketing and research and development (R&D) by manufacturers to build a premium brand image

Manufacturers continually add new ingredients to formula milk and claim that they enhance desired attributes in infants, such as mental development. Parents buy into this tactic despite the Ministry of Health (MOH), Health Promotion Board (HPB), and the Agri-Food and Veterinary Authority (AVA) stating that these nutritional claims have weak scientific evidence.

Aggressive marketing tactics in the form of advertising and sponsorships with private hospitals accompany this R&D. Nutritional claims and aspirational outcomes plastered on tins of formula milk sway parents into buying formula milk that is positioned as “premium”. Manufacturers provide sponsorships to private hospitals to ensure that their brands stay as the default formula for a longer time under the milk rotation programme, which provides first-mover advantage as parents usually stick to the formula milk that was given to their baby at hospitals.

However, some private hospitals have taken a different approach by signing up for the Baby-Friendly Hospital Initiative (BFHI). BFHI-certified hospitals must implement practices that promote and protect breastfeeding. Currently there are no BFHI private hospitals but Mount Alvernia Hospital, Raffles Hospital and Thomson Medical Centre say they are working towards achieving the certification.

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Parents should vote with their wallets to curb formula milk prices, say experts
Cheaper options available on supermarket shelves have little difference in nutritional properties, according to the authorities. Formula is not needed past the age of 12 months, but many of the products are for children aged above one. FOTO: STOCKPHOTO

95% Percentage of formula milk sales in 2015 that comprised "premium" & speciality milk. Standard milk sales made up the other 5%, and such formula typically costs less than half the price of "premium".

The best way to put the brakes on infant milk formula price hikes is for parents to vote with their wallets, economists & pricing experts say.

Its average price has more than doubled over the last decade, leading the Government to announce measures to address the issue last week amid public unhappiness. But a report by the Competition Commission of Singapore (CCS) found no evidence of anti-competitive practices by the 6 major manufacturers dominating the market here.

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The booming formula milk industry is taking a toll on parents

AVA has responded to CCS’ recommendations by broadly implementing three measures: adjusting regulations on advertising and import of formula milk, strengthening public education efforts, and encouraging hospitals to provide stronger support for breastfeeding.

The first measure involves the Sale of Infant Foods Ethics Committee, Singapore (SIFECS) extending its coverage of Code of Ethics  to infants up to 12 months of age instead of six months. The code currently restricts advertising of formula milk for infants below six months only. AVA will also impose stricter regulations on formula milk labelling to prohibit the use of idealised images through nutritional claims.


HPB will be strengthening public education efforts through a multi-year campaign on children’s nutritional needs. The campaign will be up and running by the end of May 2017.

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Call to end formula milk firms' aggressive tactics
The Competition Commission of S'pore said formula milk companies target hospitals to gain a "first-mover" advantage, given that most parents do not switch brands later.'ST FOTO: ARIFFIN JAMAR

The authorities are calling for a halt to formula milk companies' aggressive marketing methods, including inducements to hospitals, in response to public concern about the steep rise in prices.

In particular, sponsorship & payment arrangements between manufacturers & private hospitals are "conflict of interest" deals that should be reviewed, they say.

This follows a new report by Singapore's competition watchdog which found that formula milk manufacturers are paying private hospitals to distribute their products to newborns.

related:
'Milk is milk, however fancy the marketing', says Josephine Teo
Private hospitals reviewing formula – milk arrangements
Spotlight on tie-ups between formula milk firms, private hospitals
“Milk formula companies provide sponsorships, payments to private hospitals”

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Competition watchdog raises red flag on hospital sponsorships
Competition watchdog raises red flag on hospital sponsorships
The S'pore Government has indicated it wants to allow more brands to hit shelves here & tackle unsubstantiated nutrition & health claims made by milk formula makers. Foto: AFP

The Competition Commission of S'pore (CCS) has flagged concerns over sponsorships & milk rotation programmes in hospitals here, which give the major formula milk brands a “first mover advantage”, and called for these practices to be reviewed.

The commission found that sponsorships & contributions have been increasing, with manufacturers paying for pregnancy & parenting talks, training materials for hospital staff, shuttle buses for staff & discharge gift bags. These manufacturers also have tie-ups with hospitals for milk rotation programmes, where the hospital offers a brand of formula milk for newborns at any one time, & regularly rotates between the various brands.

An estimated 15 to 60% of newborns drink formula milk in hospitals, either exclusively or supplementing breast milk. Around 70% of parents who use formula milk in private hospitals have no preferred brand, and will use the default brand on rotation. They tend to stay loyal to the brand, making hospitals an important sales channel for manufacturers, the CCS said in a report released yesterday on the rising prices of formula milk sold here.

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Private hospitals paid to keep milk on rotation
Private hospitals paid to keep milk on rotation
Most parents do not have preferred brands & tend not to switch brands so milk manufacturers invest to gain "first-mover advantage". FOTO: THE STRAITS TIMES

It is not just advertising that gets premium milk powder brands entrenched in the minds of Singaporeans.

Manufacturers also provide payments, sponsorship, or both, to private hospitals for participation in their milk rotation systems - allowing them to gain a "first-mover advantage" when it comes to exposing parents to the brand, said the Competition Commission of S'pore (CCS) in its market inquiry report released yesterday.

It said: "Hospitals are one of the first avenues where parents come into contact with formula milk.

related:
CCS: 95% of buyers go for premium powder
Govt taking steps to ensure affordable milk powder options

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CCS’s Findings From the Market Inquiry into the Supply of Formula Milk

The Competition Commission of Singapore (“CCS”) has released its findings from a market inquiry into the supply of Formula Milk in Singapore.

The inquiry examined the Formula Milk industry in Singapore and the nature of competition at each level of the supply chain, in order to understand the reasons for the significant increase in the prices of Formula Milk in Singapore in recent years. According to the Singapore Department of Statistics, the average retail price of formula milk has more than doubled over the past nine years. Based on the findings, CCS also made recommendations to improve competition in the supply of Formula Milk in Singapore.

Market Inquiry Findings - Reasons for the increase in retail prices of Formula Milk:
The increase in markup of wholesale prices over manufacturing costs[3] by Formula Milk manufacturers was the main contributor to increases in the retail prices of Formula Milk. The increase in markup of wholesale prices over manufacturing costs was likely driven by the heavy investment into marketing and research & development activities undertaken by the Formula Milk manufacturers. Driven by strong consumer brand loyalty and a preference for “premium” brands in Singapore, Formula Milk manufacturers compete mainly on building a premium brand image through aggressive marketing activities and reinforcing this image by engaging in research & development to develop and introduce new ingredients contributing to attributes desired by parents, rather than on price. Such “premiumisation” strategies further strengthen consumer perceptions and entrench consumer purchasing behaviours, which in turn give the Formula Milk manufacturers the market power to increase wholesale prices, in the face of limited volume growth prospect due to low birth rate and rising breastfeeding rate. CCS has observed that Formula Milk prices in Singapore were higher than most benchmarked economies, along with China and Hong Kong
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Aggressive marketing & premium branding driving up milk formula prices in S'pore
Photo courtesy: Wikipedia

Driven by strong consumer brand loyalty and a preference for “premium” brands in Singapore, Formula Milk manufacturers compete mainly on building a premium brand image through aggressive marketing activities.

They reinforce this image by engaging in research & development (R&D) to develop and introduce new ingredients contributing to attributes desired by parents, rather than on price.

The heavy investment into marketing and R&D activities resulted in the increased markup of wholesale prices over manufacturing costs, the Competition Commission of Singapore said in a press statement on May 10, 2017.

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Milk “money”: How much are we talking about?

I refer to the article “Private hospitals reviewing formula – milk arrangements” (Straits Times, May 12).

It states:
  • “Mount Alvernia Hospital yesterday said that it does not accept sponsorships or payments from infant formula milk makers to offer their brands to new mothers.
  • It does, however, allow these companies to sponsor activities which educate patients on baby care and nutrition.
  • Formula milk companies invest significant marketing resources in hospitals to gain a “first-mover” advantage, the report said, noting that most parents do not switch formula brands later.
  • Meanwhile, Thomson Medical said suppliers pay the same amount each for their brands to be part of its monthly rotation, and most of the money is channelled to support activities that benefit patients.”
How much money in total?

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SG blames “aggressive marketing” for doubling of formula milk prices
Baby milk formula 123rf

The Ministry of Health (MOH), Health Promotion Board (HPB) and the Agri-Food & Veterinary Authority of Singapore (AVA) will be adjusting its guidelines and regulations pertaining to the advertising, labelling, and import of formula milk. According to a joint press statement issued, this is to encourage greater price competition.

This follows the findings issued by the Competition Commission of Singapore (CCS) which investigated on the increasing milk formula prices in recent years. According to the Singapore Department of Statistics, the average retail price of formula milk has more than doubled over the past nine years.
According to CCS, the increase in wholesale prices over manufacturing costs was likely driven by the heavy investment into marketing and research and development activities undertaken by formula milk manufacturers.
“Such “premiumisation” strategies further strengthen consumer perceptions and entrench consumer purchasing behaviours, which in turn give the Formula Milk manufacturers the market power to increase wholesale prices,” CCS said.

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What milk powder sponsorships’ got to do with stealing lunches?

Perhaps the CCS should also look into what other types of businesses “provide such sponsorships and/or payments to private hospitals” and “have invested significant efforts and resources into hospital marketing activities”. Because at the end of the day, the moral of the story may be that there is no such thing as a free lunch (or free milk powder) – as it is apparently evident now that the consumer may end up paying more. Sort of like having some of your future lunches stolen.

The report also said that while manufacturers sponsor activities at public hospitals, it did not influence the milk rotation schedule. And that the practice of sponsorship and fees is widespread – and this despite the fact that no financial inducements are allowed to be offered to hospitals, clinics and retail pharmacies to promote products according to the Sale of Infant Foods Ethics Committee Singapore’s (Sifecs) code of ethics.

Does that mean that one can breach the code of ethics, as long as “this does not influence the milk rotation schedule” “at public hospitals”?

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Milk powder price hikes not due to anti-competitive behaviour, says Koh Poh Koon
Choose your milk powder wisely

The price of infant milk powder has risen sharply over the last few years, and the issue was raised in Parliament on May 8.

According to figures from the Department of Statistics, the average price of a 900g tin of infant milk formula doubled between 2004 and 2014. There was also a 10 per cent increase in price in the last two years.

The New Paper, for instance, reports that over the past decade, the average price of a tin of milk powder has hiked from $25.42 to $56.06, a rise of about 120 per cent.

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Competition Commission: Singaporeans at fault for buying expensive milk powder

Due to the lack of evidence proving that baby formula milk powder suppliers are engaged in anti-competition acts, the Singapore government agency Competition Commission of Singapore (CCS) attribute the problem of unaffordable milk powder to Singaporeans having “brand loyalty” and “a penchant for premium products”.

“Brand loyalty and a penchant for premium products among parents here have driven formula milk companies to invest heavily in marketing and research and development (R&D). And this, in turn, could reinforce such consumer behaviour.” However there was no statistics showing how much money was pumped into R&D, and the CCS neither have any evidence to prove that production costs went up to justify a 150% price increase.

According to the CCS report released yesterday (May 10), the companies competed on marketing heavily and their sales skyrocketed due to “perception”. The CCS refuse to admit that there has been an under supply in Singapore market:

related:
Milk is milk, just buy whatever cheapest on sale
Minister Koh Poh Koon: Milk powder expensive? Go for cheaper brands then
“Misleading” advertisement to discourage sales of expensive milk powder

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Price of formula milk in Singapore has gone up by nearly 40%

It was recently reported that a man had been arrested for suspected involvement in a series of milk powder theft cases islandwide. It was also understood that he had intentions to resell the stolen milk powder. As would seem to be the observation of that man, is milk powder such an expensive commodity that selling it on the black market would be lucrative?

A one-stop pregnancy and parenting portal in Singapore, Babyment, collected data earlier this month about the price hike of formula milk in Singapore, and noticed the increase in price when compared with data collected in December 2012.

The portal, which advocates and promotes breastfeeding, also observed that the price of formula milk sold in Singapore was much higher than similar brands sold in Malaysia and China, with two products selling at a price that is more than double that of similar brands in Malaysia

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Kiasu and Ignorant Parents have Only Themselves to Blame for High Milk Powder Prices
redwire-singapore-milk-powder

According to the Competition Commission, 95 percent of people who bought milk powder here chose to buy premium brands. No one put a gun to their heads and forced them to pay for the more expensive milk powder. They were swayed by savvy marketing into thinking their children would get a “head start” if they consumed such branded milk powder and so they willingly paid for it. In the end, they end up jacking up the prices for the whole market.

The worst part is, all these kiasu parents don’t even know what they are paying so much money for. They only know that more expensive means better. The CCS says this about such parents:
“Insufficient understanding of the nutritional content of formula milk and the dietary requirements of infants and young children have often led parents to perceive that the more expensive or premium products are of higher quality.”
Milk powder prices can range from S$20 to S$80 a tin according to the CCS report, so why must parents buy the most expensive milk powder instead of the cheaper ones? This is kiasu-ism plain and simple. It is only common sense that you raise prices if you know people are willing and able to pay more money for your product. If you are doing business, do you dare say you won’t do the same thing?

related:
Gahmen on Expensive Milk Powder: Feed Your Kid Cheaper Formula or just Cow’s Milk
Has Health Ministry’s Lax Governance Contributed to Sky-High Milk Formula Prices

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ARE INFANT POWDER MANUFACTURER THE ONLY ONES THAT PRACTICE AGGRESSIVE MARKETING VIA HOSPITALS?

Infant formula manufacturers provide such sponsorships and/or payments to private hospitals for participation in their milk rotation systems, according to an inquiry report by the Competition Commission of Singapore (CCS) released on Wednesday (May 10). Milk formulas are provided to infants who need it in hospitals on a rotation basis. But the report found that milk formula manufacturers could ensure their products stayed on the rotation for longer periods if they provided better sponsorship support to the hospital or paid “rotation fees”.

Formula companies have invested significant efforts and resources into hospital marketing activities to gain a “first-mover” advantage, given that the majority of parents who use formula milk in hospitals do not have a preferred brand and tend not to switch brands after leaving the hospital, the report said.”

Perhaps the CCS could also look into what other types of businesses “provide such sponsorships and/or payments to private hospitals” and “have invested significant efforts and resources into hospital marketing activities”? Because at the end of the day, perhaps the moral of the story may be that there is no such thing as a free lunch (or free milk power), as it is apparently evident now that the consumer may end up paying more – kind of like having some of your future lunches stolen.

related: AGGRESSIVE MARKETING OF PREMIUM FORMULA MILK MAIN CAUSE OF HIGH MILK POWDER PRICES

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Rising cost of infant milk powder left unchecked?

The prices of infant milk powder have been in the spotlight most recently, with several MPs voicing their concern. This concern is borne out from the fact that the prices have increased at nearly twice the pace of nominal median income.

Many families have already complained and asked for help in relation to this issue. That the milk powder is a necessity, but prices have increased so dramatically, that people are forced to buy at the expensive price. Families with young children typically now have no choice but to spend more on sustaining their family. While the authorities is looking into this, the hope that prices will be lowered to previous level are not that high. After all, who would want to reduce the prices, if people are still forced to to buy, and will buy the products.

The only hope then, is for prices not to go up from the current levels now. This should have been looked at a long time ago. Now, prices are just so exorbitantly high.

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'Milk is milk, however fancy the marketing': Josephine Teo
All brands of formula milk sold in S'pore, regardless of price, "provide enough nutrition for babies to grow healthily"

Expect more public education on formula milk & a bigger push for breastfeeding following the release of findings from the Competition Commission of S'pore (CCS) into the supply of formula milk here, Minister in the Prime Minister's Office Josephine Teo said on Sat (May 13).

In a FaceBook post, she noted that CCS found that formula milk companies invested heavily in aggressive marketing & advertising activities which strengthen parents’ perceptions that “more expensive means better”.

Authorities announced earlier this week that formula milk manufacturers will not be able to use nutrition & health claims, as well as images that make drinking formula milk look attractive, once changes to Agri-Food and Veterinary Authority of Singapore (AVA) regulations take effect. AVA will also also streamline its import regulations in order to facilitate the entry of more suppliers & brands of formula milk, & the changes are expected to be finalised by end of 2017.

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Full Coverage:
Parents should vote with their wallets to curb formula milk prices
Josephine's comment,“milk is milk,however fancy the marketing” irks parents
Costly baby milk in Singapore forces parents to buy in Malaysia
Why Singaporeans buy baby milk formula in Malaysia
'Milk is milk, however fancy the marketing': Josephine Teo
No point in buying expensive milk powder: Josephine Teo
Many kids continue to take formula milk after they turn one
Minister Josephine Teo: Milk is milk, just buy whatever cheapest on sale
'Milk is milk, however fancy the marketing': Josephine Teo
The Straits Times - Home | Facebook
"I had no reason to pay more and would
'Milk is milk, however fancy the marketing', says Josephine Teo
Convenience of Buying Milk Bottles Online - Totsworld Singapore
Milk is milk, except for breast milk which is best
SG govt blames “aggressive marketing” for doubling of formula milk prices
Aggressive marketing & premium branding driving up milk formula prices
MOH urges private hospitals to commit to breastfeeding push
Competition watchdog raises red flag on hospital sponsorships
Private hospitals paid to keep milk on rotation
Spotlight on tie-ups between formula milk firms, private hospitals
CCS: 95% of buyers go for premium powder
Call to end formula milk firms' aggressive tactics
Govt taking steps to ensure affordable milk powder options