On February 21, a news of an "immediate suspension of the consumption of Abbott-related infant and toddler products" pushed Abbott to the center of the storm of public opinion. The General Administration of Customs also issued an announcement on February 20 reminding consumers to "temporarily do not purchase through any channel" and "immediately suspend" the infant and child products involved in the United States Abbott, which is not the first time that Abbott has fallen into a crisis of trust. Not only that, Abbott, which seems to have risen global sales, is experiencing the fact that the market in China is shrinking, and in the face of the milk powder track where domestic companies and foreign companies are competing, Abbott's road to China still has countless problems to be solved.
Recall of problem milk powder
A few days ago, a message from Abbott's global recall of problem milk powder came from the other side of the ocean. On February 17, local time, Abbott's global official website released a voluntary recall information, recalling three series of milk powder produced at the Sturgis plant in Michigan, three series of milk powder, Namelac, Alimentum and EleCare. The announcement also shows that the recalled products involved have the following characteristics: the first two digits of the product code are 22 to 37, and the code on the container contains K8, SH or Z2, which is valid until April 1, 2022 or later.
It is reported that the recall of Abbott products is due to consumer complaints. Some consumers said that four babies developed Enterobacter sakazaki and Salmonella infections after eating infant formula produced at a factory in Michigan, USA, and one of the babies was suspected of dying as a result. At the same time, Abbott also responded that as part of the quality inspection process, the company has tested the Michigan plant and found Enterobacter sakazaki in the non-product contact area of the factory, but there is no evidence of salmonella, which is still under investigation.
On February 20, the General Administration of Customs of China released the news that after verification by the General Administration of Customs, the special medical product Similac HMFortifi Xikang Baby Tian Baby Nutritional Supplement for Special Medical Purposes produced by the enterprises involved has an export record to China, and Abbott China has launched an independent recall.
The relevant person in charge of Abbott China told "Consumption Titanium" that at present, only one product of milk powder involved in the recall in the Chinese market is Xikang Baby, and other nutritional products are not affected.
"In the spirit of being responsible for consumers, Abbott China launched a preventive proactive recall at the first time, including immediately freezing all the inventory of HeycomBex in Abbott China's warehouse, removing the product from the official flagship store, issuing a recall announcement on the official platform, actively handling consumer return and replacement inquiries, etc., and launching a nationwide recall, and the recall plan will be completed within 30 working days, that is, within April 1, 2022." The above-mentioned relevant person in charge added.
"Consumer Titanium" noted that the products involved have been put on and off the shelves on e-commerce platforms such as Tmall and JD.com. Abbott China also reminded in the announcement that if consumers have purchased relevant products through non-general trade channels (such as cross-border e-commerce and haitao), please do not use them for the time being, and contact the purchase platform for return and exchange.
According to public information, the product involved in this time, Abbott Xikang Baby Tim, is a nutritional supplement for babies for special medical purposes, which is preterm, low birth weight infant formula. According to the State Administration of Market Regulation, the product has been registered as a formula food for special medical purposes.
Dairy analyst Song Liang told Consumer Titanium that the recall will have a significant impact on Abbott's global sales. Especially in the Chinese market, which is very sensitive to food safety issues, this is undoubtedly worse for Abbott, which is in a downward trend in the Chinese market.
The performance growth is mixed
In fact, Abbott, as a global healthcare giant, was once a star company in the market. But what is now left to Abbott is the joy brought by the rise in performance on the one hand, and the worry behind the fines on the other hand.
On January 27, Abbott released its fourth quarter and full year 2021 financial results. Abbott reported global sales of $11.5 billion in the fourth quarter, up 7.7 percent year-over-year, and adjusted diluted earnings per share of $1.32. Abbott's global sales for the full year 2021 increased 22.9% year-over-year to $43.1 billion, with adjusted diluted earnings per share of $5.21.
In terms of specific business segments, the global sales of Abbott's nutrition business in the fourth quarter of 2021 were about $2.04 billion, an increase of 5.9% year-on-year. Among them, medical nutrition products increased by 9% year-on-year, and infant nutrition products increased by 3.1% year-on-year. Global sales in the diagnostics business exceeded $4.47 billion in the fourth quarter, up 3.3% year-over-year. Among them, the global sales of new crown virus testing products in the fourth quarter reached $2.3 billion, and the medical device business achieved global sales of about $3.74 billion in the fourth quarter, an increase of 15.9% over the same period last year.
Abbott's chairman and chief executive officer, Luo Fude, said in a briefing that the current global epidemic has not yet shown signs of ending, and the demand for new crown virus testing products is expected to remain strong in 2022. In 2022, Abbott's adjusted diluted earnings per share are expected to be above $4.7.
Song Liang told Consumer Titanium that the performance growth of Abbott's global sales mainly relies on the stretching of the medical sector, but in the baby and child sector, Abbott's overall performance is very far-fetched.
At the same time, frequent fines have also plunged Abbott into a crisis of trust. In May last year, the Shanghai Municipal Administration of Market Supervision and Administration imposed an administrative penalty on Abbott for "producing and operating food and food additives contaminated by packaging materials, containers, means of transport," confiscating items and fining it more than 9 million yuan.
It is worth noting that this is not the first time that Abbott has taken a ticket in China. According to relevant data, from June 2018 to May 2021, abbott's cumulative total penalty amount reached more than 11.47 million yuan. The reasons for punishment include publishing health food advertisements in violation of the Advertising Law, publishing advertisements without review, inaccurate expressions, and unauthorized use of medical terms.
The dilemma of breaking through the Chinese market
In recent years, with the rise of domestic milk powder enterprises and foreign dairy companies increasing the Size of the Chinese market, the competition in the milk powder market has become more and more intense.
According to Euromonitor data, the size of the mainland milk powder market reached about 175.5 billion yuan in 2019. The market share of the top three enterprises in the mainland milk powder market reached 36.9%. In the first place is Nestlé, accounting for 13.5%; In second place is Feihe, accounting for 13.3%; Danone ranked third with 10.1%. At that time, Abbott had a market share of 7% in China.
Song Liang analyzed to "Consumption Titanium" that the fierce competition in the milk powder market comes from the decline in the birth rate of the population on the one hand, and on the other hand, it is related to the rise of domestic brands. It can be seen that the entire milk powder market is playing a game of market share, which also brings some pressure to Abbott.
Although Abbott did not directly disclose the specific performance of the Chinese market, a sentence in the 2020 financial report said that Abbott's downturn in the Chinese market was recorded.
Abbott said in its 2020 earnings report that in the past 3 years, Abbott's global nutrition products business has been positively affected by many new products, including breast milk oligosaccharides (HMOs) and high-protein products. Driven by related products, Abbott's child nutrition business grew by 0.3% and 3.4% in 2020 and 2019 respectively (excluding foreign exchange impact), but the growth in the United States, Asia and Latin America was partially offset by challenges from Greater China.
Song Liang told "Consumer Titanium" that Abbott's performance in the Chinese market has been in a downward trend for four or five consecutive years, and even fell out of the ranks of the top five foreign powders, and the ranking in the domestic milk powder market has also fallen out of the top ten. According to Song Liang's estimates, Abbott's sales in the Chinese market in 2021 will be roughly 2 billion to 3 billion.
In the face of sluggish performance, Abbott does not seem to choose to sit still, but instead set its sights on organic milk powder and milk powder for special medical purposes. It has successively launched organic milk powder represented by Abbott Jingzhi and Xiao'ansu, and accelerated the registration and approval of milk powder for special medical purposes in China.
It can be seen that on the organic milk powder track, the penetration rate of domestic organic milk powder brands is catching up with imported brands. Relevant data show that in 2017, Abbott Jingzhi claimed to occupy 70% of China's organic market, and its market share fell to about 50% in 2019. Nielsen data for 2020 shows that Wyeth's enlightenment has surpassed Abbott's excellence.
While the organic milk powder showed fatigue, the special medical milk powder that Abbott has always been proud of has been caught in the recall storm this time, and the impact on Abbott is self-evident. Song Liang told "Consumption Titanium" that in fact, Abbott has been performing well in special medical milk powder, but the recall of special medical milk powder Xikang Baby Tim will bring a certain blow to Abbott. In time, market reduction has become an inevitable trend, and Abbott needs to face a lot of competitive pressure and market problems.