China milk powder crackdown is tough medicine for doctors, sales representatives

Tue Oct 15, 2013 5:00pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Adam Jourdan

SHANGHAI (Reuters) - A crackdown on corruption in China's infant milk formula sector has made sales representatives and hospital doctors fearful of talking to each other, putting a brake on marketing and possibly hitting revenue growth for foreign firms.

Chinese media have repeatedly accused foreign milk powder makers, notably France's Danone SA (DANO.PA: Quote), of paying bribes to medical staff in return for recommending their brands to new and expectant mothers.

The French food maker said this week it will appoint new management at its Dumex infant formula operation in China following a bribery scandal at hospitals in the country's north.

China is a magnet for foreign infant milk formula makers, with the $12.4 billion market expected to double by 2017.

But investigations by Chinese authorities and reports in state media, often quoting whistleblowers, have curtailed marketing activity at hospitals.

"Since the 'First Drop of Milk' expose, no matter what brand of milk powder, none of the reps have been coming," said a nurse at a top Shanghai hospital.

The nurse, who declined to be identified, was referring to a recent report by official China Central Television (CCTV) that claimed milk powder firms were bribing doctors to recommend their brands as the first milk substitute a baby tastes.

While hospitals only account for 3 percent of overall infant formula sales in China, they are key for companies trying to get parents to buy their brand, according to a Chinese research firm, Beijing Shennong Kexin Agribusiness Consulting.   Continued...

A sales assistant (back) helps a customer to select Dumex milk powder at a supermarket in Hefei, Anhui province August 5, 2013. REUTERS/Stringer