In China, Nestle and Danone cut price of milk powder

Manufacturers of powdered milk for babies as Nestlé will reduce their prices in China by up to 20%, in response to the concern of regulators make the product more accessible. The market of infant formulas (the special milk for babies) moves $ 14.5 billion and has been growing at a fast rate.
The industries decision on prices happens after an investigation by the authorities about a possible anti-competitive behavior in the market for baby milk powder. Product sales by multinationals are very heated in China, where parents are still suspicious of local manufacturers, after a series of scandals involving contamination of milk.
This reaction resulted in larger sales in China for manufacturers such as Wyeth Nutrition, controlled by Nestle in Switzerland, and to the French Danone.
The subsequent frenzy has spread around the globe, unleashing a rationing in the United Kingdom and in Australia, and the imposition of prison sentences for those caught smuggling milk powder out of the country from Hong Kong.
The news about the investigation, by the national development and Reform Commission (NDRC), in charge of overseeing some clauses of the 2008 Chinese antitrust law, sparked a fall of 8%, to $ 68,85, in the share price of Mead Johnson Nutrition in New York the day before yesterday.
Nestle reported that, after research, Wyeth "evaluated pricing practices and decided to improve certain sales and marketing practices (...) to meet the concerns of the NDRC with Chinese consumer access to infant formulas ".
Wyeth also promised not to raise prices of new products next year. The price reductions, which are on average 11%, will be on Monday and will until 2014.
Danone said that his unit has been cooperating with the Commission Dumex have recently resorted and is preparing a proposal for a cut in rates.
This is not the first time that multinationals bend to the will of the Chinese Government in relation to prices. In 2011, the anglo-Dutch group of Unilever's consumer goods yielded to pressures and delayed that increases planned for food prices.
Chinese authorities routinely force the local State-owned enterprises to put the public interest ahead of commercial concerns, but Unilever's decision emphasizes a new regulatory risk by showing that large foreign multinationals are not immune to these pressures.
This week, the site of the "people's daily", the official Communist Party newspaper, quoted an analyst saying that although the new research may result in milk cheaper for consumers, it will not necessarily help local producers-who are having difficulties, since they will lose the advantage they have on prices.
Alex Howson, an analyst at Jefferies in London, said: "what is clear is that the Chinese authorities are more serious in restrictions on significant price increases that had been taking place within the sector and also to allow local competitors participate more."