Cantillon: Formula for China relies on low breast-feeding rates

Kerry's infant formula brand Green Love Plus retails for a whopping €43 a kilo in China – nearly four times the price here.

If you've ever wondered why nearly 90 per cent of the increased milk production in Ireland is being turned into powder the previous example may elucidate.

China’s seemingly insatiable demand from foreign baby food stems back to 2008 when thousands of babies fell ill from domestic formula products made from milk adulterated with melamine, a toxic chemical which artificially boosted the milk’s protein count. The domestic market has never recovered.

Amid the worst global dairy market slump in decades, Irish exports of infant formula to China jumped 40 per cent last year. The performance shielded the industry here from the worst of the downturn, which saw prices crash 30 per cent.

Infant formula now accounts for 35 per cent or €1.15 billion of Irish dairy exports, with most of the production coming from four big players – Wyeth, now part of Nestlé, Abbott, Danone and Kerry.

Authorities here are targeting a 50 per cent increase in milk production in the post-quota era, bringing output to around eight billion litres by 2020.

All this is based on the seemingly unshakeable assumption that China’s white gold rush will continue.

Beijing authorities have, however, become increasingly concerned about low breast-feeding rates. Less than a third of babies are exclusively breast-fed in China, and the number is falling despite warnings from health agencies.

In a bid to tackle the issue Chinese authorities are now considering a ban on advertisements related to products that “claim to partly or completely substitute mother’s milk”.

Experts maintain formula sales are being driven by a lack of access to maternity leave and by “unethical” marketing of formula through the maternity care system.

Nestlé suffered a major boycott of its products in the US and Europe in the late 1970s amid concerns over "aggressive marketing" of its milk substitutes.

A similar clampdown in China could have a big impact on the dairy sector here.