Mead Johnson declined 8.1 percent to $68.85 at the close in New York, biggest drop since Oct. 25. The Glenview, Illinois-based company fell 16 percent in the past 12 months.
China’s National Development and Reform Commission, the country’s top economic planning agency, has evidence milk-powder companies sold products at prices in China that have increased about 30 percent since 2008, the official People’s Daily reported yesterday. Safety scares such as a melamine-tainted milk powder scandal in 2008 that killed at least six infants have increased Chinese consumers’ distrust of local milk and driven up purchases of international brands.
Abbott’s diversified business “and its relatively lower exposure in the Chinese infant formula market help to minimize risk to the overall company,” Lawrence Biegelsen, an analyst at Wells Fargo & Co. in New York, said today in a note to clients. Abbott’s infant formula sales in China are an estimated $500 million, making up about 3 percent of total company sales, Biegelsen said.
The NDRC reviewed documents related to product pricing at Mead Johnson’s China unit and the company is cooperating fully, the company said in an e-mailed statement. Jonathan Dong, a Beijing-based spokesman for Nestle, Agnes Berthet-d’Anthonay, a Paris-based spokeswoman for Danone, and Scott Stoffel, a spokesman for Abbott Park, Illinois-based Abbott, said their companies are aware of the issue and are working with government authorities.
Nestle and Danone’s infant nutrition units said they would cut prices.
Nestle’s Wyeth, which Vevey, Switzerland-based Nestle acquired from Pfizer Inc. in April 2012, will lower the prices of certain infant-formula products 6 percent to 20 percent, and promised not to raise prices of new products for a year, it said in a statement. The average reduction will be 11 percent. Danone’s Dumex unit is preparing a price cut and will disclose details later, the company said in an e-mailed response to questions.
The investigation follows China’s attempt to consolidate its milk-formula industry and create strong domestic brands. China targets creating 10 large companies in the industry within two years, each with annual revenue of more than 2 billion yuan ($326 million), China National Radio reported last month, citing Gao Fu, an official at the Ministry of Industry and Information.
Mead Johnson had a 14 percent share of China’s 77.9 billion yuan milk-formula market last year, according to industry researcher Euromonitor International.
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