Alibaba's Internet Subsidiary Bypasses Retail Outlets To Sell Milk Direct To Chinese Buyers

Tmall.com, the B2C Internet shopping subsidiary of Alibaba Group, announced that it will cooperate with Danone and Nestle to launch direct sales and delivery of milk powder under six brands of the two groups, allowing Chinese consumers to enjoy the safe importation of milk powder products.

Danone's Karicare, Nutrilon, Cow & Gate and Dumex, and Nestle's NAN.H.A and Wyeth sold on Tmall.com will all be directly supplied from the country of origin, including New Zealand, the United Kingdom, Germany, the Netherlands, and Switzerland. The best-selling brand in New Zealand, Karicare, and the best-selling brand in the Netherlands, Nutrilon, have already opened official flagship stores on Tmall.com.

Cow & Gate, the second largest milk powder brand in the United Kingdom, will enter the Chinese e-commerce website's sales channel in the second half of 2013. As the first step of the direct supply cooperation, Nutrilon's full imported milk powder from the country of origin will be exclusively launched on Tmall.com on March 11, 2013.

Zhang Yong, president of Tmall.com, told local media that the milk powder products launched this time are 100% manufactured abroad. Apart from the ordinary B2C sales model, Tmall.com will tap the C2B pre-sales method. With this method, after the consumers place their orders, the manufacturers will implement direct supply from the place of production; and the products will then be delivered to consumers.

Milk powder and milk supplies in China are a touchy subject, and currently it is illegal to bring more than a small amount of milk powder into mainland China via Hong Kong. Chinese consumers are also wary of buying domestic milk powder because of a rash of reports in recent years of tainted milk-based products from companies such as Mengniu and Yili.

In October 2008, media in Xi'an reported that a four-month old baby contracted a kidney stone after feeding on Wyeth milk powder. At that time, Wyeth said that there was no evidence showing that the baby's symptoms had any link with its products. But later, there were online reports saying that babies in Taizhou and Fenghua also had kidney problems as a result of drinking Wyeth products, and as at March 3, 2009, there were a total of 20 babies reported as suffering from kidney stones as a result of using Wyeth milk powder products. Parents of four of the 20 sick babies, were reported to have accepted CNY2,000 compensation offered by Wyeth at that time.

Then in January 2010, Chinese media reported that Shandong Zibi Lvsan'er Dairy Company, Liaoning Tieling Wuzhou Food Company, and Hebei Tangshan Leting County Kaida Cold Storage Plant all had tainted milk products. Melamine was reportedly identified in the products of the three, including products which SZLDCL made on April 25, 2009; Wuzhou brand popsicles made by LTWFC on April 9, 2009; and Banana Orchard popsicles made by HTLCKCSP on March 19, 2009.

And a month later in February 2010, the Beijing Municipal Administration for Industry and Commerce disclosed that the Chinese dairy product manufacturer Beingmate violated sales rules when selling its dairy products. According to BMAIC, investigations by the Consumers' Association showed that Beingmate broke "The International Code for Marketing of Breastmilk Substitutes: and China's rules on the sale of breastmilk substitutes. In addition there are problems with the promotional information on the company's packaging."

So Tmall.com's new service is both a breakthrough in thawing regulatory control over shipment and sales of milk products, and it gives consumers a new channel for buying necessary milk goods.