Historically, China’s pharmacies have not sold infant formula. This reflected a regulatory situation in which they needed a Pharmaceutical Trade License from the local Food and Drug Administrations, while retailers selling food required a Food Circulation Permit from local government. Few have applied for both. Recently, though, some pharmacies have started to sell infant formula in some cities, such as Guangzhou, Shanghai and Qingdao. However, there are still obstacles in the development of this channel.
A case in point is LBX Pharmacy, a well known national pharmacy chain, which held an event on 10 July to formally announce that it is to focus on promoting formula sales. The company has established special counters for infant formula in three of its flagship stores in Guangzhou, through which tenbrands of infant formula are sold, including Abbott, Wyeth, Biostime, etc. Most of the sold infant formulas are multinational brands, but the company intends to introduce more domestic infant formula brands. In fact, LBX Pharmacy began to sell infant formula as early as 2009 in its flagship stores nationwide, although at that time it sold only one brand—Biostime. However, sales through pharmacies accounted for only about 8% of Biostime’s total sales in 2012, but Biostime believes this channel will contribute significantly to its business in the future with more government promotion in this sector.
This trend is indeed promoted by government policy. According to Dairy Products China News issued by CCM in August, on 20 June, nine ministries including the Ministry of Agriculture and the China Food and Drug Administration (CFDA) released the Suggestions on Further Strengthening Infant Formula Safety and Quality. One of the measures requires trying out special counter sales of infant formula in pharmacies, which has attracted the public’s attention and led to requests for further information about the policy. In this context, the CFDA released further details, indicating that the idea of trying out sales of infant formula in pharmacies is based on the experience from overseas markets, where pharmacies provide a key sales channel for infant formula.
The channel is expected to better guarantee the safety of infant formula because of the strict management system (with Good Supply Practices for Pharmaceutical Products, “GSP”) under which pharmacies operate. The details note that the CFDA will gradually carry out a pilot program applying this sales channel, and any pharmacy that receives a circulation license for infant formulacan set up a special counter in this way. Based on the pilot results, the CFDA will formulate related management measures and supervision systems to refine the approach. It’s expected that more regulations will be issued to lay out how infant formula sales though pharmacies can work in practice.
Some pharmacies see this as an opportunity given government promotion of the channel and their GSP management and the presence of nutritionists to provide nutrition services and professional advice to consumers, rather than simply sales staff in supermarkets. However, there are obstacles in the promotion of this sales channel.
Customers are still used to buying infant formula through traditional channels in China, especially from supermarkets, and this habit may be hard to change in a short time. Supermarkets sometimes arrange sales promotions for infant formula, which are attractive for customers. In addition, some pharmacies are unwilling to try the new approach. Pharmacies typically get discounts of 30–40% on the prices of healthcare products, which is more profitable than infant formula sales.
A number of pharmacies are also likely to withdraw from this approachbecause they have tried this channel in the past and found it could not make enough sales. For example, Da Shen Lin Pharmacy, another well known national pharmacy chain, has been selling just two brands of infant formula, Mead Johnson and Abbott, in some of its flagship stores since 2010, but with only low sales to date.
Table Contents of Dairy Products China News 1308:
Prospects for Jiyuan Yili Dairy
Infant Formula Prices Decrease
Milk Supply Shortfall Debate
Pharmacy Starts Trial Sales of Infant Formula
Dairy Imports Increase in H1
NZ Starts Infant Formula Brand Register
Government Boosts Livestock Subsidy
Yili Partners with Dairy Farmers of America
Hunan Dakang Targets Dairy Business
Huishan Dairy Expands Farming Activities
Tianyou Dairy Launches New Yoghurt
QHT Performs Well in GOS
Dairy Products China News, a monthly publication issued by CCM on 15th, offers you the latest information on new market dynamics, company development, new products, technology, packaging and raw material supply, etc. It also focuses on the government’s direction and polices, helping you get the whole picture of the industry.
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