Watchdog agency bans milk-formula ads to curb prices

Watchdog agency bans milk-formula ads to curb prices

The government has prohibited manufacturers and distributors to advertise milk-formula products used to replace breast milk.

The Ministry of Finance (MOF) has requested enterprises to cut the ad budgets in an aim to force prices down.

At the milk shop on Son Tay Street in Hanoi, a saleswoman was seen introducing a sale promotion to customers.

The customers who buy two Physiolac 900 gr boxes will be given backpacks as the gifts, and if they don’t want the backpacks, they will get a discount of VND40,000. The buyers of Nutifood products will have opportunities to receive scooters or electric cookers.

The saleswoman offered a discount rate of VND60,000 to buyers of an Enfa 900 gr box, priced at VND420,000. As such, the promotional value accounts for 15 percent of the milk box.

Huong, the owner of a sweets shop on Dich Vong street, noted that special promotions are usually offered to formula buyers, especially foreign-made formula products.

“The promotional value sometimes accounts for up to 20 percent of the products’ prices,” she noted.

Huong estimates that if formula manufacturers do not have to spend money on sale promotion campaigns, they will be able to slash prices by dozens of thousands of dong for every box sold.

Ngo Tri Long, a renowned economist, said that dairy producers and distributors spend big money on ads and marketing activities, which are considered when they set prices. As a result, prices are always “sky high”.

The Ministry of Finance found from an inspection tour in April that four out of five inspected companies spent VND386 billion on ad campaigns in 2013 and the first three months of 2014.

Abbott was found spending more than allowed by the corporate income tax law. Mead Johnson was also found spending VND249 billion more than allowed.

Will the ban be respected?

Long believes that the ad ban, applied to formula products for children under 24 months old, to take effect on March 1, 2015, will help formula manufacturers and distributors cut selling prices.

However, Long warned that the manufacturers and distributors may dodge the laws to continue spending money on ads and marketing activities.

“They may pay money to physicians, midwives, nutrition experts and educators who will help them advertise their products,” he said.

Ha Quang Tuan, chair of Hanoimilk, said the ban would not affect the dairy producers who have reasonable ad budgets.

“Foreign companies spend hundreds of billions of dong on ads, while Hanoimilk’s ad budget only accounts for 7 percent of the total costs,” he said.

vietnamnet