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The competition watchdog said that the rising price of formula milk provided the impetus behind its market inquiry, which was conducted between October 2015 and August 2016. The issue of high formula milk costs also came under the spotlight recently and was debated in Parliament on Monday.
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The CCS report found that manufacturers spend heavily on research and development as well as marketing in order to make their products appear premium, and build consumer loyalty to their brands.
Manufacturers introduce new ingredients that contribute to attributes desired by parents, the competition watchdog said, adding that such ingredients make promises like improving overall mental function, promoting a healthy intestinal tract and aiding brain and eye development.
The premium image is important to these brands because they compete against other brands and their products based on brand name, nutrition and safety, rather than on price, CCS said.
Such strategies appear to have worked, with premium and specialty formula milk products that now cost about S$60 for a 900g tin making up an estimated 95 per cent of total sales in 2015, according to the CCS report.
“Despite the similarity in nutritional standards with other countries, manufacturers often choose to bring premium formulation into Singapore,” CCS said, adding that to further build a “premium image”, some manufacturers import their formula milk products from Europe, Australia and New Zealand because they believe that consumers in Singapore have a preference for products from these places. Formula milk prices were found to be higher in Singapore than in countries like Japan, Indonesia and Australia.
Anecdotal feedback suggested that some parents perceive more expensive brands as having better quality, CCS said. This could be due to manufacturers’ aggressive marketing and advertising efforts and the inability of parents to accurately assess the price versus quality trade-off.
“Some parents may find it difficult to understand the nutritional content of formula milk, a child’s nutrient requirements and the significance of the additional “premium” ingredient,” the report said, adding that the parents may then rely on price as a quality indicator.
In terms of marketing, manufacturers have devoted more effort to selling their products to hospitals. They provide sponsorship, payment, or both to private hospitals in particular, as private hospitals here are not part of the Baby-friendly Hospital Initiative that prevents such arrangements.
The three public hospitals here that offer maternity services - KK Women's and Children's Hospital, Singapore General Hospital, and National University Hospital - have been certified as part of the scheme.
"Such features of the formula milk market can present significant barriers to entry for new brands or barriers to expansion for existing brands which do not engage in such efforts,” CCS said.
PROBLEMS WITH SELLING CHEAPER MILK
In its inquiry, CCS found that cheaper formula milk may not necessarily enjoy higher sales. CCS cited a supermarket that had worked with a manufacturer to bring in a “value-for-money” formula milk product from an established brand in response to customer feedback on high prices.
“Despite various marketing activities by the manufacturer, sales were weak and the product was discontinued by the manufacturer as it was not commercially viable and the manufacturer could not meet the minimum order quantity from its factories,” the watchdog said.
CCS recommended that the public be educated on the nutritional content of formula milk and the nutritional requirements of infants and young children, and that consumer awareness on the availability of a variety of formula milk, including cheaper products, be increased. It also suggested lower barriers to entry by reviewing parallel importation rules, as well as the sponsorship and payments that manufacturers provide hospitals.
Read more at http://www.channelnewsasia.com/news...k-prices-risen-so-much-over-the-years-8832634
