Coles Cracks Down On Baby Formula 'Black Market', But Why?

There's a lot of money in baby formula in China, but this leaves families on home soil without access to a product they genuinely need.

What you need to know
  • Some Coles supermarkets will store formula behind the counter to prevent mass-purchase
  • A major concern is the lack of access Australian families have to the product
  • Coles and Woolworth's two-tin limit will continue

Some Coles supermarkets will now store baby formula behind counters to combat mass-purchasing and consequent shipping to China.

Six 'problem' stores in Sydney had their shelves stripped of the product on Tuesday,  so the sales of formula can be strictly monitored.

"Coles is committed to ensuring that our customers with a genuine need for infant formula have access to this product," a Coles spokesperson said.

"To make sure we have formula available for customers, in some stores we are keeping infant formula behind the service desk or using specially designed electronic article surveillance (EAS) lids that can only be removed at the register."

Only selected brands will be stored behind the counter, however, Coles was unable to disclose the names of these for security reasons. Coles will also be sticking to their two-tin per customer limit.

Woolworths will also continue to limit the sale of baby formula by two tins per customer, but won't be storing the product behind counters.

"Baby formula remains available on the shelf for customers in Woolworths stores, and we're continuing to work with our suppliers to increase the supply of these essential family items," a Woolworths spokesperson said.

At first glance, it seems there's a lot of fuss about not a lot when it comes to baby formula, but dig a little deeper and an issue years old is exposed.

What Is The 'Daigou Trade'?

Daigou translates to overseas personal shopper and is the name given to the trade where customers buy goods with the intention of sending them overseas to be re-sold. The so-called 'Daigou trade' commonly refers to Chinese shoppers who buy baby formula to send back to China.

The Daigou trade for formula is huge in Australia. Image: Getty Images
What's The Concern?

There's a number of concerns about this. However, availability to local customers is the big one.

There's long been concern that families who genuinely need formula are unable to purchase it, as daigou shoppers buy it in bulk from supermarkets.

"We understand the frustration our customers feel when they can't get the products they need. While we know the vast majority of customers only buy what they need for their family, our teams do work hard to uphold the two tin limit in our stores," a Woolworths spokesperson told ten daily.

But, the two-tin limit is often criticised as flawed, where a single customer has the ability to return to a store repeatedly, simply purchasing formula in two-tin-lots in separate transactions.

Both Coles and Woolworths however, maintain that they monitor the sale of formula closely.

Why Is China So Interested In Australian Formula?

Making money is one reason and protecting the health of children is another.

a2 Milk's Asia-Pacific CEO Peter Nathan told ten daily that there is a problem with counterfeit baby formula in China. It's known in Chinese markets that foreign products haven't been tampered with and are therefore, highly saught after.

"It’s better [in Australia] because there is a risk the product has been counterfeited in China," Nathan said.

"In Australia ... they prefer that is has not been counterfeited as opposed to what they can buy in China as there is a risk that it isn’t imported like they say it is."

These counterfeited products have also left Chinese parents desperate to buy Australian formula as infants have died from local made alternatives in the past. 

Does The Trade Help Australian Businesses?

International demand for Australian products does boost Aussie profit. In the case of a2, the company sees profit from organised international exports to China, domestic sales and online orders available Australia-wide.

a2's Platinum formula was the fastest growing brand in the share market increasing from 16 percent to 26 percent in 2017, according to the company's website.  a2 is also the only brand in Australia that is sold in all six major supermarkets, including Coles and Wolllies.

"We do sell a lot of product in the Daigou trade and welcome that in addition to the product we sell domestically," Nathan said. 

Nathan said also that supermarket limits haven't affected a2's profits and that he accepts supermarket's decision to manage formula sale and storage.

"It is up to the supermarket, that’s their decision," Nathan said. 

"There have been limits for along period of time and that is a feature of selling formula in this market and that hasn’t affected sales."