A SENIOR Woolworths executive has admitted the company pays mere "lip service" to enforcing its four-tin limit on infant formula, aimed at safeguarding supplies for Australian families.
Half the infant formula sold by supermarket chains is shipped overseas to help meet soaring Chinese demand, providing more than $200 million of windfall sales for the big retailers.
Confidential industry data reveals that supermarket sales of infant formula have almost doubled, from $226 million in 2012 to $430 million in 2015. That figure is on target to break through the $500 million barrier by March, as Chinese demand continues to strip Australian supplies.
Coles and Woolworths have faced a backlash from angry parents unable to buy their preferred brand of infant formula, while prices have surged based on overseas demand.
Bellamy's raised its prices recently by up to 30 per cent.
Woolworths introduced a four-tin limit on infant formula sales, while rival Coles halved its quota to two tins. Coles has introduced new technology at checkouts, which stops customers exceeding their limit.
A senior Woolworths executive told Fairfax Media the beleaguered supermarket chain was doing little to enforce its quota, saying "sales are worth way too much for us".
"We put up the signs on the shelves about can limits and give lip service to enforcing it," the executive said.
"Sales are worth way too much for us. Look at Coles. They fought a small price rise on Tim Tams and waived through a 30 per cent hike on Bellamy's. That tells a story...we know more than half the sales are grey market and turn a blind eye."
While sales of formula have almost doubled, the number of Australian babies has declined since 2012, from 310,000 to 300,000. There has been no big fall in breastfeeding rates for Australian mothers in the same period.
China is home to 20 million babies, of which just 25 per cent are breastfed.
Scares over contaminated formula have created a multibillion-dollar black market for Australian and American infant formula in China, where consumers pay two to three times the price for popular local brands.
Such is the demand that some of Australia's most popular brands, including Bellamy's Organic, a2 Platinum and Karicare, are sold out almost constantly, angering Australian parents.
In November the federal government opened talks with the big retailers about resolving the increasing baby formula shortage.
Assistant Trade Minister Richard Colbeck said the government was reluctant to intervene because it was concerned it could undermine the prices Australian farmers were paid for their milk.
"The problem is you intervene in the market, like they did in New Zealand - it had a very detrimental effect on the producers of infant formula - and it's actually flowed back to farmgate in lower prices to dairy farmers," Senator Colbeck said.
"That's one of the reasons why I have been so reluctant to see government intervention in that space. I'd prefer to see the supermarkets put limitations on purchases and have direct engagement with customers...so they can meet their customer needs."
Grey market sales to China show no sign of slowing. A shipping company based in Preston said new supermarket limits were working in their favour, because the receipt worked like a "certificate of authenticity" in China.
"When we sell two cans, we sell [it] with a receipt from Woolworths," a staff member said.
"Then they trust the formula was bought here in Australia. It's like a certificate of authenticity and we charge more."
A spokesman for Woolworths said the supermarket "works hard to ensure there is sufficient infant formula available for all our customers".
"We have been working with suppliers to try to increase supply, and at the same time have lowered out limit of tins per transaction to four," he said. "We enforce this by stopping larger transactions at the till."
