Pharmacy starts trial sales of infant formula

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 applied for both, especially as Chinese consumers were accustomed to buying infant formula from supermarkets. 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 focusing on promoting formula sales. The chain has established special counters for infant formula in 3 of its flagship stores in Guangzhou;10 brands of infant formula are sold, including Abbott, Wyeth, Biostime etc. Most of those stocked are multinational brands, but the company intends to introduce more domestic infant formula brands. In fact, LBX Pharmacy began to sell infant formula as long ago as 2009 in its flagship stores nationwide, although at that stage it sold only one brand –Biostime. Sales through pharmacies accounted for about 8% of Biostime’s total sales in 2012 and Biostime believe 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, 9 ministries including the Ministry of Agriculture and the China Food and Drug Administration (CFDA) released Suggestions on Further Strengthening Infant Formula Safety and Quality. One of the measures requires trying out special counter sales of infant formula in pharmacies – this 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 noted that the CFDA would gradually carry out a pilot program in this sales channel, and that any pharmacy which receives a circulation license for infant formula can set up a special counter in this way. Based on the pilot results, the CFDA would formulate related management measures and supervision systems to refine the approach.

 

Some pharmacies see this as an opportunity given government promotion of the channel and their GSP management, which is stricter than supermarkets, 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 promotion of this sales channel.

Customers are still used to buying infant formula through traditional channels in China, especially in supermarkets, so it may be hard for them to change this habit. Supermarkets sometimes run sales promotions on infant formula, which are attractive for customers. In addition, some pharmacies are unwilling to try the new approach; one factor is that, unlike with infant formula, pharmacies typically get discounts of 30-40% on the prices of healthcare products, making them more profitable for them. It’s expected that more regulations will be issued to lay out how formula sales though pharmacies will work in practice.

 

A number of pharmacies are also likely put off because in the past some such chains have tried this channel before and then given it up or ended up struggling to make enough sales. For example, Da Shen Lin Pharmacy, another well known national chain pharmacy, has been selling just 2 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 15^th, 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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