Posted on September 21, 2015

Parents Outraged as Chemist Warehouse Buys into Chinese Baby Formula Racket

Frank Chung, News, September 19, 2015

Discount pharmacy chain Chemist Warehouse has begun offering direct shipping to China amid claims it is taking advantage of the black market in Australian baby formula, which local Chinese purchase and resell online and through social media for massive profit.

Demand in China for Australian infant formula and other health products has skyrocketed since 2008 when melamine contamination saw six babies die and 300,000 fall ill. In 2013, News Corp revealed that Chinese students were being recruited en masse to buy up infant formula to sell on the black market.

Since then, many chemists and supermarkets including Chemist Warehouse, Priceline, Aldi, Coles and Woolworths across Melbourne and Sydney have introduced limits on the number of tins per customer to prevent Chinese nationals depleting supply for locals.

The limits have proven difficult to enforce, with shelves often stripped bare as quickly as new stock arrives. In 2013, a $25 tin of formula would sell for about $55. Today, the same tin can fetch up to $100.

“It’s happening everywhere at the moment, it’s a real movement,” said Simon Hansford, founder of Milk Powder Australia. “Companies like [baby food maker] Bellamy’s, a2, Swisse and Blackmores are absolutely cleaning up.

“All the stuff going off the shelves in Woolies and Coles is going straight overseas.”

Angry residents of Sydney’s Hurstville, which has a large Chinese population, have vented their frustration on social media. One photo taken in the Hurstville Chemist Warehouse shows a special promotion on a shelf of Karicare formula reading: “Courier to China. 7-10 days. September special: $7.50/kg”.

Another photo taken at the Westfield Priceline shows a nearly empty shelf. “Baby formula limit. Three tins per family per day. Sorry for the inconvenience,” the notice reads.

It is unclear how long Chemist Warehouse has been offering shipping to China, although it makes sense for the chain to aim for a bigger slice of the transaction given the majority of formula sold will be shipped overseas anyway. Founder Damien Gance did not respond to requests for comment on Thursday.

“This has to stop,” wrote one resident.

“When we have to go to four different stores or supermarkets and still can’t buy a single tin of what I need . . . start looking after Australian babies first before sending all of our stock overseas for a ridiculous profit. Money hungry f****.”

One woman who said she previously worked at the Hurstville Chemist Warehouse said she understood the frustration. “It frustrates us staff members seeing them try to buy it all and other families can’t,” she wrote.

“As soon as the Asians know you have any in stock the whole family comes up and they pretend they don’t know each other. It’s not fair, it breaks my heart when women come in and can’t get the formula for their kids.”

One Hurstville resident said there were a growing number of bare-bones packing and shipping outfits popping up posing as ‘souvenir’ stores, purchasing stock in bulk from the supermarkets and taking orders from China via social media platforms such as WeChat.

In July, Vice reported on a similar trend in Melbourne’s CBD.

Baby formula is not a restricted or prohibited item under the Customs Act and Customs and Border Protection does not control its import or export. There is no suggestion the stores are engaged in illegal activity.

Meanwhile, German discounter Aldi appears to be taking a stand. Twitter user Drew White reported staff at an Aldi store in Canberra confiscating items from a customer purchasing in bulk.

In a statement, an Aldi spokeswoman told “Aldi Australia does not have a policy regarding the bulk buying of products from Aldi stores, including infant formula. However, Aldi stores reserve the right to limit customer purchases to reasonable quantities, to ensure our products remain available to other shoppers.”

Milk Powder Australia’s Mr Hansford said the shortages were creating a panic for some parents, but it was generally only in areas with large Chinese populations.

“There’s plenty of stock, it’s just in these areas where the Chinese are hammering it. The factories aren’t keeping up in certain areas. It’s more a logistics problem than anything,” he said.

He argued that the Australian government should be treating Chinese students as sales reps, highlighting the opportunities of the China-Australia Free Trade Agreement.

“They get off the plane and get on the phone, and Mum says, ‘What’s good in Australia?’ They say, ‘The dairy’s good, the water’s good, the vitamins are good.’ She says, ‘Send me some’.

“If I was the government I’d be standing at the arrival gate with a brochure: here are all the great things Australia has to offer.”