No matter how much China’s state media badmouth overseas infant formula brands, the country’s parents remain faithful to the imported product. The strong run of Biostime International Holdings Ltd. (01112.HK) is a clear reflection of such consumer loyalty.
The Guangzhou-based counter rose for a second straight day on Friday despite the state inspectors discovering excessive coli-form contamination in samples of one of its lactobacillus powders imported from France. Biostime swiftly reassured consumers that the samples in question were originally destined for research and development, and they have been returned to the supplier.
Biostime has touted its use of imported ingredients to become one of the most popular homegrown infant formula labels. Its share price has jumped over 90 percent in the last three months, not only recovering ground lost in an earlier antitrust investigation but also scaling new heights to HK$67.10 (US$8.60).
Perhaps, Biostime should have the state’s antitrust regulator to thank for boosting its business. Following claims of price gouging in July, the company decisively cut the retail price of its flagship infant formula products by 11 percent and increased incentives for consumption in July.
Although the company was fined about 163 million yuan (US$26.62 million) for price fixing, the incident turned out to be a blessing in disguise. Due to its price cuts and timely expansion of online and offline channels, Biostime attracted more consumers than before. The number of active members of its Mama100 club increased to 1,854,607 at the end of September from 1,730,427 in June.
Biostime is well aware that mainland parents prefer to let their children drink imported dairy products because of concerns about safety, especially after the industrial chemical melamine was detected in a raft of locally made milk products in 2008.
It’s a demand that Biostime seeks to build on. It has bought a stake in French agribusiness Isigny Sainte Mère, which will not only secure a source of high-quality raw milk but also strengthen the foreign-sourcing image of Biostime.
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