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Social enterprises should enter formula milk market

Only a few multinationals serve Singapore’s formula milk market now. Limited choices, marketing prowess and aspirational demand augment their market power, which enables them to maximise profits.

The writer says consumers who are prepared to pay less for formula milk would have another option if house brands of acceptable quality are provided. Photo: Koh Mui Fong

The writer says consumers who are prepared to pay less for formula milk would have another option if house brands of acceptable quality are provided. Photo: Koh Mui Fong

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Only a few multinationals serve Singapore’s formula milk market now. Limited choices, marketing prowess and aspirational demand augment their market power, which enables them to maximise profits.

If the companies, being profit-oriented, can raise prices and thrive, why would they not do so?

Besides looking at regulation and the facilitation of more import choices, as reported in “Taskforce set up to address rising prices of formula milk by year-end” (May 23), the task force could look at unleashing market forces in another area.

Social enterprises should develop their own brand of formula milk that could perceptibly fetch good value at lower prices, as a business, instead of making money just by selling the multinational brands.

NTUC FairPrice’s house brands are but one example of leveraging market forces for social good or to moderate prices.

Parents who want to pay high prices for formula milk will continue to do so. Consumers who reason that milk is milk can be expected to buy cheaper house brands.

This scenario has a few merits. First, if these brands are provided by enterprises with well-honed marketing capabilities and established retail channels, they can and would be willing to make less profit owing to their social mission, yet be viable.

Second, consumers who are prepared to pay less for formula milk of acceptable quality would then have another option.

Lastly, competition from worthy but lower-price players would cause market rates to adjust downwards in the best-case scenario.

Barriers such as know-how and a small domestic market are surmountable.

Dumex, which is doing brisk business in formula milk here, started in Denmark, a small market, but has a global footprint now.

Singapore should seize this formula milk price problem as an opportunity to meet domestic needs and also develop a sustainable business for the growing middle class in South-east Asia and greater Asia.

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