Danone says to cut China baby formula prices amid probe

PARIS - French food group Danone became the second multinational group after Nestle on Thursday to cut prices for baby formula in China.

Danone said that its subsidiary Dumex would cut prices for baby formula in China, after the government there launched an investigation into alleged price-fixing by foreign firms.

Nestle unit Wyeth Nutrition pledged late on Wednesday "immediately" to cut prices on some formula products by six to 20 per cent.

"In cooperation with the NDRC (China's National Development and Reform Commission), Dumex is currently preparing a proposal to lower prices, details of which will be provided later," a Danone spokeswoman told AFP.

State media reported Tuesday that the NDRC, China's top economic planner, had launched a probe of foreign baby formula makers for high prices, which it claimed resulted from a monopoly-like situation.

A 2008 scandal involving tainted formula that killed six children and sickened more than 300,000 prompted domestic consumers to shun local brands and created huge demand for foreign products.

Baby formula is like milk, but has a higher nutrition content.

Other foreign companies being investigated include Mead Johnson Nutrition, Abbott Laboratories and Dutch firm Royal FrieslandCampina, state media said.

Danone has made significant efforts to expand into China's growing market for dairy products and in May announced it was investing about 325 million euros (S$537.5 million) via two joint ventures in distribution and production.

Last year Danone generated about six per cent of its sales in China, or 1.3 billion euros out of a total of more than 20 billion.