Why did Blackmores make a point of listing baby formula?

Blackmores, almost the largest vitamin and health care products supplier in Australia, finally listed baby formula at the beginning of 2016, after half year of preparation (The SMH, 2016). According to investigation by The Sydney Morning Herald, Blackmores’ baby formula just managed to 0.1% of the $173 million infant formula market in Australian pharmacies (The SMH, 2016). The Chief Executor of Blackmores indicated that Blackmores is going to distribute the baby formula through supermarkets which account for 90% of baby formula annual sales in Australia and tried to promote the new product through advertisements on TV (The SMH, 2016).

图片市场1

These are new baby formula products provided by Blackmores. Source from: The Sydney Morning Herald.

But, In spite of Blackmores’ high brand awareness in vitamins and health care products, as a mother in Australia, would you like to buy baby formula labeled by a vitamins and health care products supplier, at even a higher price than the top brand Bellamy in domestic market? No, I will not, if I am a mom. I definitely choose baby formula from Bellamy, Karicare and a2 which are the leaders in the market, let alone the price of Blackmores as a new entrant in the baby formula is even higher than the industry leaders.

图片市场2

Newborn formula of Blackmores is priced at $28.99 while the newborn formula of Bellamy is priced at $27.99 on the website of Chemist warehouse.

Source from: website of Chemist Warehouse.

Actually, Blackmores definitely understands the industry competition situation well before entering the baby formula market. So, why did Blackmores still make a point of listing baby formula? The answer is enriching the product line through providing baby formula is to better meet the demands of Blackmores’ target consumer group in China. Over half of Blackmores’ sales over past years were contributed by Asia market while China market is a key market in Blackmores’ Asia market (Blackmores, 2015). One reason is the food safety issue in China. Food safety is a big issue in China. More and more food additives and even chemical composition as additives make Chinese people really prefer to buy food and health care products from Australia where requirements and administrative regulations on food are almost the strictest in the world (The Australian, 2016). That is why Chinese mothers from middle and top income level prefer to pay more to buy imported baby formula but not domestic brand formula. Especially, growing up of cross-border e-commerce in China and efforts of ‘grey market’ exporters (http://www.news.com.au/finance/business/retail/baby-formula-shortage-leaves-shelves-bare-but-just-around-the-corner-theres-milk-powder-aplenty/news-story/96b8c59e76e279c4b1c1eb2c27e31896 ) including overseas students from China and Chinese immigrants greatly avoid tariff, which make the sales price of the baby formula of top brands in China affordable for more families (News.com.au, 2016). Of course, this is also why we always see the limited purchasing notes of baby formula and other health care products in supermarkets and pharmacies.

图片市场3

A Coles supermarket in Glen Waverley, right near A&A Travel is selling only two tins of baby formula per customer. Source from: News.com.au.

Therefore, as a vitamins and health care product giant, Blackmores’ market positioning in China is reasonable and accurate. Now, we could understand why Blackmores made a point to provide baby formula even if the external market in Australia is extremely competitive. New product, baby formula, is just a product strategy of Blackmores to meet the demand of target customers in China.

In addition, Chinese people concerning about face-saving is well known by the world and they believe in brand especially foreign brand (The Australian, 2016). They would like to pay more for foreign famous brands. That is why China becomes the super market of luxury products. If you ask me, ‘do you think higher price means higher quality?’ ‘Yes, I think probably.’ That is my answer. How do you think the answer from most of Chinese people who concern brand and worry about the safety of domestic food and products? The answer is clearly. And why the new product is priced highly by Blackmores is also explained.  

Now, we can find out that launching the new product baby formula and pricing it highly are the product and pricing strategies of Blackmores as parts of marketing strategy in China market. So, even the domestic market does not buy it, I think Blackmores will still win in China market.

 

 

 

 

 

Reference 

Blackmores, (2015), Annual report of 2015.

 The Australian, (2016), Milk formula exports to China set to grow, retrieved at 18th, July 2016, from:

http://www.theaustralian.com.au/business/companies/milk-formula-exports-to-china-set-to-grow/news-story/584a239f6bb9b5dc7029a6b1f90efff9&memtype=anonymous

 The Sydney Morning Herald, (2016). Blackmores faces big test in cracking infant formula market, retrieved at 18th, July 2016, from:

http://www.smh.com.au/business/blackmores-faces-big-test-in-cracking-infant-formula-market-20160411-go3h7c.html

Chemist Warehouse, (2016). Blackmores Newborn Formula 900g, retrieved at 18th, July 2016, from:

http://www.chemistwarehouse.com.au/buy/78395/Blackmores-Newborn-Formula-900g

The Sydney Morning Herald, (2016). Blackmores lists new infant formula on Australian and Chinese websites, retrieved at 18th, July 2016, from:

http://www.smh.com.au/business/blackmores-lists-new-infant-formula-on-australian-and-chinese-websites-20160112-gm49rx.html

 News.com.au, (2016), Baby formula tins exported to China from within a travel agency, retrieved at 18th, July 2016, from:

http://www.news.com.au/finance/business/retail/baby-formula-tins-exported-to-china-from-within-a-travel-agency/news-story/a2290387cdb16a9188131be6d7dbf3e8

 

Xiaoyang Wang

ID: 216038464

 

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s