July 9, 2013 / 9:14 AM / in 5 years

Danone, Biostime cut China infant milk prices amid probe

HONG KONG (Reuters) - French food giant Danone SA (DANO.PA) said it had cut prices of its baby milk formula products in China by up to 20 percent following an investigation by Beijing into possible price-fixing and anti-competitive behavior in the sector.

Danone said its Dumex Baby Food Co had “paid close attention to, and fully cooperated” with the probe by China’s top economic planning agency. From July 9, the firm reduced sales prices of its main products by 5-20 percent.

“Consumers of all stages in our range and of different economic profiles will be able to enjoy the benefits that our price-cut proposal brings to them,” it said in a statement on Monday.

The firm had expressed its intention to cut prices on July 3 but did not announce the scale of cuts at the time.

The probe by China’s National Development and Reform Commission into five leading foreign infant milk companies is seen by some analysts as part of a broader Chinese plan to boost consumption of local infant milk products, and could herald further consolidation of the sector.

Another infant milk producer being investigated, Biostime International Holdings (1112.HK), said that it would offer a series of consumer rewards granting customers an effective discount of “around 11 percent” off suggested retail prices.

“These activities will benefit consumers directly and will enhance our business partners’ confidence,” the company said in a statement to the Hong Kong stock exchange on Tuesday.

    Danone’s Swiss rival Nestle NESN.VX cut prices for its key baby products by an average of 11 percent last week, and pledged to freeze prices on new products over the next year.

    Mothers in China turned away from Chinese milk powder in 2008 when infant formula tainted with the industrial compound melamine killed at least six babies and made thousands sick with kidney stones.

    China has since made efforts to crack down on persistent food safety problems that have included chemical-laced pork and infant milk contaminated with cancer-causing agents.

    Despite the price cuts, Beijing’s probe is continuing into the sector, with analysts saying the investigation could result in fines and tougher rules governing imports into an infant milk market set to grow to $25 billion by 2017.

    Dumex said in its statement it had launched an “internal review” to ensure its operations complied with the relevant provisions of China’s anti-trust laws.

    Reporting by James Pomfret and Dominique Vidalon; Editing by Jacqueline Wong

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