Shoppers are seen loading tins of baby formula into a car in this file image taken in Melbourne last year. A man claiming to be a reseller of formula to China has described driving from supermarket to supermarket to stock up on the formula in an online investor forum.
SLICK digital marketing, cargo deliveries under the cover of darkness, and a $700 weekly pay packet.
These are some of the trade secrets a Sydney-based “daigou” has revealed, giving intimate insights into the lucrative underground industry of reselling Australian-made baby formula to desperate parents in China.
Translating to “buyer’s agent” or “personal shopper”, thousands of the Chinese daigou are believed to be operating all over Australia — more than 3000 in Sydney alone — stocking up on the powdered “white gold” to ship overseas at massively inflated prices.
In online posts to an Australian stock market forum, which have since been deleted, a user who claims to be a Chinese man living in Sydney has described how he cracked the baby formula exporting trade and details the shipping business he claimed to be running alongside his day job.
‘DAIGOU PROVIDES US WITH EXTRA CASH’
In removed posts seen by news.com.au, the man says he came to Sydney to study and work, and was lured into the lucrative exporting trade when he realised its business potential while supplying formula to family and friends.
While some daigou are believed to be raking in six figures salaries from their trade, this particular user claimed he and his wife operated a small sideline business supplementing his regular income.
“We started to do daigou because my Chinese friends and relatives asked us to do [it] for them in the first place, they know we are living in Sydney so we can access to safe baby formula,” he posted.
“Daigou provides us extra cash which is important for us to live in an expensive city like Sydney. On average we can make around 600 or 700 dollars per week but it is also hard work.
“My wife had to constantly chat with Chinese customers on the phone to take orders and I have to drive out to get the products from supermarkets when I finished my daily job ... in the night we have to carefully package them and deliver those parcels to cargo company in the weekend.”
The author describes visiting several supermarkets and chemists each night, having to adhere to buying limits enforced by retailers to prevent such behaviour. Only being allowed to purchase two or four tins at a time means driving suburbs to suburb to collect large volumes of the product.
A Coles supermarket in Glen Waverley rationing cans of baby formula just metres from a travel ageSource:Supplied
He says the high demand for organic and “safe” baby formula in China can be traced back to the 2008 milk scandal which sparked an ongoing food safety scare. Even though there is formula available in China, local product is not trusted by Chinese buyers, the daigou explains.
‘THEY OWE US A FAVOUR’
The online discussion details marketing strategies employed by sellers in China using social media platform WeChat, and explains how the seller believes online promotion by daigou contributes to high sales and product shortage.
The man says a shortage of popular brand Karicare and Aptamil formulas saw Chinese sellers begin to promote Bellamy’s, which was “virtually unknown” in China at the time, he claims, via WeChat.
“So the daigou social network came in,” he writes.
“They started to promote Bellamy formulas, they said it is organic, pure and natural bla bla, so the Chinese parents gave a try and I think Chinese babies like the taste.”
The result was Bellamy formula became popular overnight and so did its share price, the post claimed.
The man claimed social media promoters changed tactics again when Bellamy’s fell into short supply.
“Eventually Bellamy formulas were short of supplies as well. So daigou social network started to promote Karicare’s Aptamil formula again and which let’s both of formulas were short of supply by the end of last year,” he writes.
“At the end the daigou social network had no choice but to promote A2 formula and branded it as rich people’s formula since it was twice expensive than Aptamil and Bellamy.”
The purported daigou also shared a breakdown of the formula he sells, and revealed other products that are onsold to Chinese buyers.
The revealing messages were posted on a thread for investors in A2M shares — the ASX listed A2 Milk Company Limited.
Directly addressing shareholders and prospective investors, the purported daigou takes credit for the surge in share prices of organic formula distributor Bellamy’s on behalf of grey market sellers, and predicts a similar fate for A2M. The baby formula boom saw BAL (Bellamy’s) shares surge around 700 per cent in 2015.
“I think BAL owe daigou a big favour,” the daigou writes.
“As long as Chinese government does not fix the food safety issue, daigou will exist and Bellamy and A2M will have bright future.”
The man says the intention of his post is to “help future investing decisions” and asked fellow forum participants not to judge his actions.
“I am just an ordinary family man trying to make a living,” he writes.
THIS IS VERY TYPICAL
Ben Sun from Think China, an Australian digital marketing firm specialising in targeting the Chinese market says the comprehensive confessional was a story he’d heard many times before.
“This is very typical,” he told news.com.au.
“I would say every single Chinese student or migrant would know some of their friends doing this type of job. They usually start with family and friends and then friends’ friends, to a bigger volume.”
Mr Sun said it was common for diagou to make around $600 — $700 per week as described in the deleted posts, but there were many different levels.
“I would say most people are doing it as a side job, and they would probably make around 600 — 700 each week. That’s a side job. But there are large number of daigou doing this as a fulltime job and full families where, for example, the wife is looking after the customer service and the man collecting the stock and looking after logistics. It’s different levels,” he said.
Mr Sun also said the social media strategies had been accurately described.
Formula companies are reluctant to give grey market sellers credit for influencing the market.
Both A2 and Bellamy’s failed to respond to news.com.au’s requests for comment.
But Mr Sun conceded social media promotion by daigou was influential among their significant international social media networks.
He said if one product was in short supply, aggressive marketing of an alternative would drive up demand for whatever was in stock.
“Why they do that is, whoever can get the stock can make the money,” he said.
“They move their promotion focus to different brands when the couldn’t get the stock. They change a lot and their networks are large, so yes, they do have influence on what people want to buy. This is not a small network. There are a lot of people in Australia doing this and they are buying a lot of the products.”
Many Chinese buyers prefer to source their products from Australian retailers like Woolworths, and demand a receipt to prove it.Source:Supplied
Infant formula makers have struggled to keep up with demand for their product in Australia, with the tins, selling for up to $28 dollars, frequently disappearing from supermarket and chemist shelves quicker than they can be restocked.
Supermarkets have blamed suppliers for failing to keep up with demand, while suppliers say the fault lies with retailers’ systems with families ultimately suffering from the formula shortage.
Though formula makers like A2 and Bellamy’s sell and aggressively market their products in China, they are sold for far higher prices. A lack of trust in retailers combined with a strong presence of counterfeit sellers has led wary Chinese shoppers to turn to trusted Australian retailers and ignited the burgeoning daigou trade.
Do you know more? Email elizabeth.burke@news.com.au
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