Formula demand is here to stay

By Country News on December 09, 2015

‘‘’’The high demand and subsequent rationing of infant milk formula on Australian supermarket shelves appears to be here to stay.

Woolworths and Coles supermarkets told Country News they were working hard with suppliers to increase stocks, while Bellamy’s, Danone Nutricia (makers of the popular Karicare brand) and the a2 Milk Company have all confirmed a significant increase in their operations and production.

UDV and Australian Dairy Farmers reported normal activity for farmers supplying milk.

Milk Powder Australia said the demand was an opportunity for the Australian dairy industry which should be embraced.

Bega Cheese chairman Barry Irvin said the increased demand for infant formula had been evident on a global scale for years but the more recent spike had affected Tatura Milk’s long-term planning.

‘‘There’s this grey channel that’s opened up which has made it harder to forecast,’’ Mr Irvin said.

Reports suggest the current spike in demand is linked to the formula being sold to Chinese consumers seeking safe, high-quality Australian products.

Mr Irvin said this ‘‘grey channel’’, or on-selling, had affected the balance between supply and demand, and retailers — who were usually ‘‘very good at understanding consumers’’ — were being challenged.

Time was also an issue and Mr Irvin said people needed to understand that manufacturers cannot respond immediately to a massive peak in demand because the process involved in making infant formula was lengthy and required the sourcing of complex ingredients.

‘‘You can’t suddenly recognise the spike in demand one day and fill it the next — it takes time for the supply chain to respond.’’

While he believes the demand for formula will not change, Mr Irvin is convinced the industry will respond accordingly and have the capacity to manage supply better in the long-term.

‘‘If you look around the world in last two to three years, there has been an enormous investment in infant formula infrastructure.

‘‘As we get more comfortable (stocks) and as the spike settles down and gets more predictable, then forecasting will match up to demand. Hopefully, this time next year we are in a better position.’’

’Industry representatives could not predict how long it would take to fulfil the spike in demand for formula, however a Woolworths spokesperson said the supermarket had no plans to remove its per transaction limit, which had been in place for ‘‘a number of years’’.

By Country News on December 09, 2015

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