Review of the effectiveness and validity of operations of the MAIF Agreement:Research Paper

Appendix D - Assessment of the Australian marketing environment

Page last updated: 18 June 2012

In response and anticipation to changes in the broader macro environment, companies often consider strategies within the context of the marketing mix– a set of decisions related to price, channels of distribution, product, communications and customer relationship management. Part of this marketing mix is the four Ps of marketing:

  • Product- the combination of product attributes (e.g. packaging, size, quality, design) which differentiates the product from those of competitors and satisfies consumer need
  • Price- encompasses variables in list price such as discounts, payment terms and allowances to maximise the target market’s willingness to pay
  • Place- refers to distribution channels and coverage and how the consumer gets access to the product
  • Promotion- methods used to generate brand awareness and influence purchase through the use of advertising, sales promotions and sales force, PR and direct marketing.
Current trends in the four P’s with respect to the infant formula market are outlined in more detail below.

D.1 Products

A number of new strategies to differentiate products have occurred since 1992. Relative to developing countries, the marketing techniques adopted in Australia and comparable countries to promote infant formula are often more subtle (Brady 2012). Two key developments relevant to the infant formula market are brand line extensions and product modifications.

Brand line extensions

The introduction of new items using a successful brand name presents a number of benefits to manufacturers, including command of more retailer shelf space and greater product association by consumers. Since 1992, a number of manufacturers have extended their product lines to include toddler milk drinks, with product identifiers and package design often closely resembling infant formula. This enables toddler milk drink advertisements to act as de-facto adverts for infant formula (Berry et al 2010), hindering the ability of consumers to differentiate between products. Manufacturers have also now released Junior Milk Drinks – often identified as ‘Step 4’ (e.g. Nurture Gold Junior Milk Drink 4).

Product modifications

Modifications or improvements to the quality, features or style of a product are key strategies for distinguishing products from market competitors. Manufacturers are increasingly adding new substances to infant formula with the intent of generating additional health benefits or making the composition more similar to breast milk. Although there is no established process to substantiate the significance of these additional substances in normal growth and development (FSANZ 2011), manufacturers market products as offering increased health benefits to infants. Some examples include:
  • Pfizer S-26 Gold Newborn claims “S-26 Gold Newborn with Alpha-Pro, for babies from birth, is a premium infant formula with an advanced new formulation and more whey that is well tolerated and easy to digest”
  • Amptimal Gold + claims it is “inspired by breast milk”, uses the phrase “Immunnocare: Nutritionally supporting your baby’s immune system” and claims to have “fish oil to help support brain and eye development”
A number of stakeholders suggested through surveys improvements to labelling requirements for infant formula products. It was suggested that manufacturers should be prevented from promoting perceived health benefits of using formula and that all product labelling should include the health risks associated with formula use. One suggestion was mandatory promotion of the MAIF Agreement and WHO Code on labels.

D.2 Promotion

Electronic marketing and social media have been two highly significant changes to promotional strategies over the past two decades. In 1992 when the MAIF Agreement was introduced, the role of the internet in advertising was inconceivable and unanticipated (Australian Breastfeeding Association 2007). Many new digital and social marketing options are now available for the provision of targeted interventions to a wide range of consumers (Shealy et al 2005), enabling manufacturers to test the boundaries of advertising regulations.

Examples of new avenues for advertising include:
  • Discussion forums- online forums are a new means through which parents can publically endorse products (e.g. Bub Hub, Huggies Forum)
  • Support lines – many manufacturers are now providing support to new mothers either online or through a helpline advertised on product packaging. E.g. the Kariclub Careline claims “we have a team of experts and mums ready to help and support”.
  • Product review websites (e.g. Productreview.com.au)- provide a means for retailers and manufacturers to have their products recommended and discussed
  • Social media- Twitter, facebook and YouTube provide an avenue for manufacturers to develop relationships and discuss products with consumers.
Social media has been a particularly influential factor on the marketing environment. Current use of social media by signatories and non-signatories are shown in Table 17.
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Table 17: Promotion of infant formula through social media

Pfizer S-26 Gold and SMAHeinz NurtureBellamy’s Organic infant formula
Website
  • Mothers’ support page is accessible through the product page
  • Links are provided to both Facebook and YouTube.
  • Dedicated page for parents
  • Links to both Heinz and external resources (posters, factsheets)
  • Monthly electronic direct mail newsletter
  • Direct links to Facebook, Twitter and company blog
  • Professional endorsements and customer testimonials
  • Highly active blog with advice for new mothers and women planning pregnancy
Facebook
  • Page name ‘S-26 Gold Toddler Australia’ (with over 3500 likes)
  • Provides free samples to mothers and holds trivia competitions
  • Questions are responded to directly or consumers are directed to the Careline support care centre
No presence
  • Very active page with almost daily posts and conversation with the public
  • Postings of personal items including fun-runs, baby videos and market stalls
TwitterNo presenceNo presenceVery active with up to three daily posts

Position themselves as experts on mothering to win consumer trust

User ID: @BellamysOrganic

YouTube
  • User name ‘S26GoldToddler’
  • Product endorsements and provision of advice about breastfeeding and baby development
No channel, however have advertisements on other channels (e.g. for Nurture and Nurture Gold).No presence

D.3 Place

Product positioning is a commonly used technique to differentiate products within the market. There is evidence of infant formula manufacturers using scientific claims (e.g. Aptimal Gold+ uses the phrase “Nutricia research” and “scientifically researched ingredients to nutritionally support the immune system”) or trying to create a sense of trust amongst consumers to increase the appeal of products (e.g. Pfizer S-26 Gold uses the phrase “trusted by generations of mums” whilst Karicare claims it has been “caring for babies since 1896” and displays images of hearts and teddy bears)
Consumer access to infant formula is also largely impacted by in-store presentation by retailers. Techniques to increase consumer access to products include:
  • Shelf displays – Whilst shelf displays vary between retailers, many display infant formula products by brand (rather than separation by age group). This increases the impact of associated marketing between toddler milk drinks and infant formulas and decreases the capacity of consumers to distinguish between products or easily recognise those products covered under the MAIF Agreement.
  • Display locations – The location of infant formula within retailers impacts consumer access and attitudes towards products. Large displays near point-of sale increase accessibility, whilst placement of formula alongside health products or other child-care items (e.g. nappies) can normalise the use of infant formula.
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D.4 Price

Due to the net public benefit resulting from operation of the MAIF Agreement, in 1992 the ACCC gave authorisation to the MAIF Agreement. In 2007 re-authorisation was granted, providing signatories with immunity from prosecution under the Trade Practices Act (1974)1 for any potentially anti-competitive behaviour that may result from the terms of the MAIF Agreement.

There is evidence of infant formula manufacturers using price to differentiate products from consumers. Some manufacturers have adopted segmented pricing strategies to target their ‘premium’ infant formula at a different consumer market whilst other specialised infant formulas (e.g. organic, goats milk) have higher prices. For example Pfizer SMA retails for approximately $13.50 at large supermarkets whilst Pfizer s-26 gold retails for approximately $29.00. Across the range of manufacturers, there is a wide range of price variation, with products ranging from approximately $13.50 to $30.00.

Retailers are also actively using discount incentives for selling infant formula products. Both pharmacies and supermarket retailers provide promotional discounts on formula products with the intent of increasing sales. Current coverage of the MAIF Agreement does not include retailers, providing them with the freedom to implement the most suitable pricing strategies to maximise sales and profit.

1 Now the Competition and Consumer Act 2010.