Baby food shortage in Europe due to China demand

[April 27, 2013]  BERLIN (AP) -- Yong-Hee Kim still can't believe that in a prosperous country like Germany, powdered baby formula would ever be rationed and that she would have to scour shops in the German capital to find the right brand for her 13-month-old son.

But that's what has happened since major retailers in Germany this year began limiting sales of leading brands of baby formula. Parents in Britain, the Netherlands and Hong Kong have faced similar restrictions.

The reason for the sudden shortage is a quirk of globalization -- one that illustrates the complexities of supply and demand in a wired world.

Parents thousands of miles away in China have been using the Internet or tapping friends and relatives in Europe to buy up stocks of high quality European-produced formula -- often paying much higher prices than they would here.

Chinese demand for foreign brands soared after drought in Australia and New Zealand cut supplies from China's major sources of imported baby formula. Chinese parents who have enough money have largely shunned local brands since a contaminated milk scandal in 2008 left six babies dead and another 300,000 sick.

With Chinese consumers turning to sources abroad, major retail outlets in Germany, Britain, the Netherlands and Hong Kong have limited sales of several leading brands of baby formula. In Europe, parents have been stockpiling the milk powder at home, further intensifying the shortage.

"They don't sell more than three boxes of formula per store anymore. So my husband and I are checking out all those stores, running from A to B, to make sure we can get the right baby milk powder for our son," Kim said as she watched her son at a playground in Berlin's leafy Prenzlauer Berg neighborhood.

"We even end up paying two, three or four euros more for a box," she sighed. "It's really annoying."

In Germany, the run on powdered milk started in February, according to dm, a major chain of drug stores, which are the main retail outlets for baby food in this country.

Sales clerks at stores in major tourist venues, including international airports and Berlin's Friedrichstrasse train station, noticed Chinese travelers piling shopping carts to the brim with boxes of one popular brand, Aptamil.

"We noticed that due to extremely high demand we weren't able to provide enough Aptamil baby food," said Christoph Werner, a spokesman for dm. "So we decided to limit the amount of Aptamil products temporarily."

Hong Kong also announced curbs in February on baby formula purchases by customers from mainland China. The multinational food company Danone in Britain said it had significantly increased the production of Aptamil, after leading supermarket chains Tesco and Sainsbury's said they had to limit formula sales. Stores elsewhere in Europe also limited sales of two other popular brands -- Milumil and Cow & Gate.

"We understand that the increased demand is a result of unofficial exports to China to satisfy the needs of Chinese parents who want international brands for their babies," Danone said in a statement.

In China, however, the perspective is different.

Ma Zhigao, who lives in the southern Chinese city of Shenzhen, turned to his brother-in-law in Germany for supplies of Aptamil to feed his 2-year-old son. He soon realized a lot of his fellow Chinese were anxious to get hold of foreign formula.

He set up a side business buying formula abroad, supplying his family and selling the surplus online. The sales restrictions in Germany are cutting into his business.

"Following the ban from Germany, my business suffered a sudden decline, and after our own consumption, I have almost nothing left," said Ma, who works in construction. "I even have to calculate carefully to save enough for my child. I'm seriously considering closing my online business now."

Even regular Chinese retailers are feeling the pinch.

The Shenzhen Jiulong Trading Company used to sell dozens of boxes of imported formula each day but is now worried about shrinking supplies.

"We sell Aptamil formula to Chinese parents who don't have much trust in domestic brands," said Huang Juan, a sales manager. "We used to import from New Zealand, but due to the sales ban from the New Zealand government, we have been suffering shortages."

Between eager Chinese buyers and worried Germans hoarding supplies, demand for Aptamil in this country went up by more than four percent in the past year and would have probably gone up higher if outlets hadn't restricted sales.

"We've already reacted and increased our production," said Heike Mueller, a spokesman for Milupa, which is owned by Danone and produces Milumil.

Mueller told The Associated Press that the company has hired more workers at its plant in Fulda in southwestern Germany and expanded its 24-hour telephone hotline, which parents can call if they can't find enough formula in their local stores.

In some cases, he said, the company has sent families extra boxes of formula to make sure the babies can get enough.

"We have also received requests from so-called companies in China asking if they could import our products directly, but we've rejected all those demands strictly," Mueller said. "Our priority is to deliver enough products to mothers and fathers in Germany."

[Associated Press; By KIRSTEN GRIESHABER]

Associated Press researcher Yu Bing contributed to this report from Beijing.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.