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Nestlé working with Saudi officials to 'harmonize' infant formula prices

By Mark Astley+

21-May-2014
Last updated on 22-May-2014 at 11:34 GMT2014-05-22T11:34:15Z

Nestlé working with Saudi officials to 'harmonize' formula prices

Nestlé is working with Saudi Arabian authorities to "harmonize" infant formula prices following the launch of an investigation into alleged "synchronized" price hikes by the sector's biggest players.

Earlier this month, the Saudi Arabian Ministry of Commerce and Industry (MCI) announced that it was probing alleged price hikes by the “largest institutions and companies producing and imports infant milk.”

Seven unnamed infant formula manufacturers and importers have been warned by the MCI that they face penalties of up to 10% of their total annual sales, in addition to returning all profits from the price increases, if efforts are not made to rectify identified violations.

DairyReporter.com approached Nestlé, which since its acquisition of Wyeth Nutrition controls the largest share of the Saudi Arabian infant formula market, last week regarding the investigation but no response was forthcoming.

One week later, the Swiss food and beverage giant has confirmed that it is working with authorities to "harmonise" infant formula prices in the country.

“The Saudi Arabian government has requested that infant formula manufacturers, including Nestlé, harmonise their infant formula pricing to eliminate current price discrepancies across the region. The media has inaccurately portrayed this request by the government as a response to ‘price fixing’ by infant formula companies,” said a statement issued by Nestlé.

“We are committed to working closely with the Saudi Arabian government, as we do with governments in all counties in which we operate, and will shortly share with them our approach for harmonising the prices of our infant formula across the region.”

"No comment"

Through visits to 10 offices in Riyadh and Jeddah, where they collected statements and confiscated documents, MCI officials claim to have uncovered various violations relating to “marketing procedures, administrate decisions, agreements and contracts.”

Nestlé, which markets Nan infant formula and a number of other Wyeth brands in Saudi Arabia, declined to confirm whether its offices in Jeddah and Riyadh were among the 10 visited by the MCI officials.

Similac (Abbott), Aptamil (Danone Nutricia), Bebelac (Danone Nutricia) and Enfamil (Almarai) are also among the best selling infant formula brands in Saudi Arabia.

Danone-owned Nutricia, which according to Euromonitor holds the second largest share of the market, declined to discuss whether its business in Saudi Arabia is one of the seven firms being probed.

US infant formula giant Abbott Laboratories, Saudi Arabia's third largest infant formula player, also declined to confirm whether its office in Jeddah was among those visited by MCI officials.

“We have no comment,” Pamela Harrison, head of international public affairs at Abbott, told DairyReporter.com.

Sales of infant formula in Saudi Arabia have rocketed in recent years and the market was last year worth around 1.383bn Saudi Riyal ($369m, €269m).

The key driver of this growth, according to Euromonitor, was the sharp increase in unit prices in recent years.

This price hike has been well documented by the media in Saudi Arabia, but little has been done until now to control these prices.