Milk Formula Cap Proves Effective in Controlling Parallel Trade
A majority of parents in Shenzhen said that the formula cap implemented by Hong Kong per trip gave them more opportunities to purchase baby formula at a more reasonable price. Last March 1st Hong Kong started to limit the amount of baby formula that outbound travelers can bring across the border to 1.8 kilograms or two stand cans of formula.
During December up to January when the cap was not yet implemented, residents could hardly buy popular milk brands such as Mead Johnson or Nutradefense at stores like Mannings and Watsons. So parents had to settle buying at local pharmacies at a slightly higher price. But since the cap was placed it became easier for them to buy branded milk formulas at stores while pharmacies also started to sell the formula at normal price.
The sudden changes shows that the cap is effective in slowing down the business of parallel traders that travel to Hong Kong to purchase large amounts of milk formula then resells them at a higher price in Shenzhen and other inland cities.
The short supply of baby milk formula just before the cap were mainly blamed on mainland parents, but actually the blame should be on shops and dealers in Hong Kong that are selling large amounts of the formula to parallel traders. Once the cap was implemented the market supply went back to normal.