Milk Formula Companies Pay For Hospitals’ D&D Events — And Prices Are Going Up

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Perks For Hospitals To Provide Certain Milk Formula Brands To Infants

In 2004, a 900g tin of milk formula would have set you back by $25.54 on average. Fast forward 10 years, and the price of the exact, same tin has increased by a whopping 120%.

Why is there such a jaw-dropping hike in prices? It could be because according to the Competition Commission of Singapore (CCS), milk formula companies are paying to sponsor private hospitals’ dinner and dance functions, among other things.

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87-Page Exposé

While parents fret over expensive milk formula, major players like Abbott and Nestle say the high prices are down to “research and development to improve formulas”.

Rising overhead costs are also cited as a reason for the surge in pricing.

While the cost of doing business in Singapore has undoubtedly increased over the past decade, the CCS thinks there’s more to it than meets the eye.

As more and more parents express their unhappiness, the competition watchdog published an extensive, 87-page report on May 10, detailing the reasons behind the rise in prices for formula milk, reported The Straits Times.

Fees And Sponsorships

Different brands of formulas are provided to infants in hospitals on a rotational basis, but the document revealed that by sponsoring the private hospitals’ expenses or paying “rotation fees”, they could expect their product to remain in the rotation for a longer time.

The sponsorships can include anything from training fees for hospital staff, shuttle buses for patients and visitors, maternity bags for new mothers, or even the hospitals’ dinner and dance functions.

The tie-ins also enable the hospitals to prepare parents for parenthood and organise educational events for staff.

Such in-kind donations greatly benefit the companies, as parents tend not to switch brands once they leave the hospital.

Associate Professor Lan Luh Luh, from the National University of Singapore’s Business School and Faculty of Law, was quoted by the South China Morning Post as saying: “It has been found that parents are unlikely to switch brand once the baby has been introduced to a certain brand promoted by the hospital at the child’s birth – that is why the companies have been tying up with private hospitals.”

With the majority of parents having no preference for any brands during their stay, significant investments are thus made to secure future sales.

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Controlling The Monopoly

It’s no secret that parents in Singapore are kiasu. Hence, the formula milk manufacturers have vigorously cultivated a premium brand image in a bid to attract them.

Driven by “strong consumer brand loyalty”, heavy investments are subsequently made to reinforce this “premium” image. Rather than focus on keeping their prices attractive, the companies rather spend their resources on developing new ingredients to entice parents.

Not to mention that some of the marketing tactics employed include making claims of improved nutritional and health benefits for “premium” powder, and potentially misleading labelling. Read our story on the misleading labelling of milk powder.

Furthermore, representatives from the manufacturers will regularly update healthcare professionals on their new products and unique selling points, “subtly influencing” the formula milk that doctors recommend to parents, according to the CCS.

This leads to a vicious cycle, as shops and supermarkets would be inclined to carry the major brands rather than the smaller ones, which, the report notes, have similar nutritional value compared to their premium counterparts.

As a result, the cheaper brands are priced out of the competition and have to engage in “premiumisation” campaigns of their own to increase their desirability.

Statistics by the Statistics Department of Singapore confirmed that the price increases were proportionate to the amount companies have spent on marketing — a 900g tin of powder increased by 44% between 2010 and 2014, with total marketing expenditure by all manufacturers increasing by 42.4% during the same period.

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No Way To Stop It

Shortly after the release of the damning report, various private hospitals like Parkway Pantai and Mount Alvernia Hospital have started reviewing its formula milk arrangements, reported The Straits Times.

However, there remains a loophole that benefits manufacturers.

While the code of ethics set by the Sale of Infant Foods Ethics Committee Singapore (SIFECS) prohibits “financial inducements (to be offered to hospitals) clinics and retail pharmacies to promote products”, there are “no specific remedies set out in the event of a breach of the code”.

SIFECS chairman Ho Lai Yun has admitted that the panel is unable to take legal action. He told The Straits Times that the current code “does not cover sponsorship by infant milk formula companies to participate in the milk rotation system, as it does not dictate nor propose any system of milk rotation in the hospital to the milk companies and the hospitals”.

Will companies continue to flout the rules knowing there would be minimal ramifications from the Health Promotion Board?

JB To The Rescue?

With babies consuming up to four tins — or $200 worth — of formula per month, it’s little wonder some families are making trips across the Causeway to purchase milk formula in bulk.

According to The Straits Times, a tin can cost up to 40% cheaper.

The irony? They are manufactured in Singapore.

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Help For Families

Prior to the CCS report, the situation deteriorated to the point where all five community development councils and the NTUC FairPrice Foundation had to pour in $1.5 million to provide 7,500 low-income families with vouchers to purchase milk powder.

The Singapore authorities also are encouraging more hospitals to achieve the international Baby-Friendly Hospital Initiative (BFHI) certification. Under the scheme, hospitals are prevented from entering sponsorship arrangements with formula milk companies due to conflict of interest. Currently, none of our hospitals are BFHI certified.

Politicians like Minister in the Prime Minister’s Office and Second Minister for Manpower and Foreign Affairs Josephine Teo have also told parents that all milk is the same and there’s nothing wrong with buying cheaper options.

Cash Cows

As Singapore’s birth rate continues to plummet and its market providing limited growth opportunities for manufacturers, it won’t be surprising should formula milk companies decide to continue with their breathless marketing efforts.

While it’s understandable for them to adapt their public image to remain viable in a wildly competitive industry, this incident questions the nature of their marketing. Are companies going too far by causing unsuspecting parents to pay more for their insidious marketing methods, or are they merely capitalising on favourable conditions enabled by a lack of government regulations?

Milk formula companies can preach about how they care about our children’s welfare, but this unfortunate episode only seems to point to one thing — our future generations are simply cash cows in their eyes.

Featured images adapted from Facebook and the AVA

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