Fon­terra says sorry for ‘anx­i­ety’

Sales of af­fected prod­ucts have taken a beat­ing, re­port Wang Shan­shan and Jiang Xue­qing in Bei­jing, and Zhou Wenting in Shang­hai.

China Daily (Hong Kong) - - FOCUS -

Fon­terra Co­op­er­a­tive Group, the New Zealand- based com­pany at the cen­ter of a milk pow­der safety scare, apol­o­gized on Mon­day and pledged that all the con­tam­i­nated ma­te­rial would be brought un­der con­trol within 48 hours. “We re­ally re­gret the dis­tress and anx­i­ety which this is­sue could have caused,” said Fon­terra CEO Theo Spier­ings at a me­dia brief­ing in Bei­jing. “We to­tally un­der­stand there is con­cern by par­ents and other con­sumers around the world. Par­ents have the right to know that in­fant nu­tri­tion and other dairy prod­ucts are harm­less and safe.”

Alarm bells started ring­ing on the week­end when Fon­terra an­nounced that tests con­ducted on July 31 had dis­cov­ered the bac­terium Clostrid­ium bo­tulinum in whey pro­tein con­cen­trate man­u­fac­tured at its Haup­tau plant in Waikato in May. Food man­u­fac­tur­ers use the whey pro­tein as a raw ma­te­rial in baby for­mula and sports drinks.

The bac­terium can se­verely dam­age, and even de­stroy, the ner­vous sys­tem if in­gested and can also trig­ger neu­ral paral­y­sis in in­fants un­der 12 months.

How­ever, the name of one of the com­pa­nies that used the con­tam­i­nated whey pro­tein in its in­fant nu­tri­tion prod­ucts re­mains un­known af­ter the New Zealand­based dairy gi­ant de­clined to iden­tify the man­u­fac­turer con­cerned.

Spier­ings said he was com­ply­ing with the wishes of the com­pany, which had re­quested not to be named. How­ever, he in­sisted that the af­fected prod­ucts are al­ready un­der con­trol.

“One of the cus­tomers asked us not to men­tion its name, but we are in con­tact with them,” said Spier­ings, who wouldn’t say whether the com­pany is Chi­nese or based over­seas.

Com­pa­nies known to have used the con­tam­i­nated whey pro­tein in­clude Dumex Baby Food Co, a sub­sidiary of Danone Group, China’s largest bev­er­age pro­ducer Hangzhou Wa­haha Health Food Co and Hangzhou Wa­haha Im­port and Ex­port Co, and Coca-Cola Shang­hai, which ob­tained the prod­uct from a lo­cal sup­plier, ac­cord­ing to the China Food and Drug Ad­min­is­tra­tion.

“We are work­ing closely with Danone in or­der to be fully trans­par­ent. Dumex has re­ported a to­tal of 12 batches of prod­ucts that may con­tain the bac­te­ria. Half of the prod­ucts are still in the ware­house, while the other half has been re­called,” Spier­ings said.

More than 420 met­ric tons of Dumex baby for­mula pro­duced with the tainted con­cen­trate have been sold to con­sumers, ac­cord­ing to the Shang­hai Bureau of Qual­ity and Tech­ni­cal Su­per­vi­sion.

Bev­er­ages pro­duced with the tainted whey pro­tein are safe to drink, Spier­ings said.

“We’ve con­firmed with the bev­er­age clients that the bac­te­ria can­not sur­vive the heat treat­ment of the pro­duc­tion process. Those com­pa­nies prod­ucts are clear,” Spier­ings said.

On Sun­day, the na­tion’s top qual­ity watch­dog, the Gen­eral Ad­min­is­tra­tion of Qual­ity Su­per­vi­sion, In­spec­tion and Quar­an­tine of the Peo­ple’s Repub­lic of China, asked the com­pa­nies to re­call all the prod­ucts in­volved.

Wa­haha has pro­duced a list of prod­ucts made with the whey and said they have been al­most sold out since Oc­to­ber, but that no bac­te­ria have been found in the end prod­ucts.

Coca- Cola said it pro­duced 19,000 crates of bev­er­age us­ing the con­tam­i­nated pro­tein on March 5. The drinks were trans­ported to the Guangxi Zhuang au­ton­o­mous re­gion, and the prov­inces of Yun­nan and Guang­dong, but are now be­ing re­called, ac­cord­ing to re­ports on China Cen­tral Tele­vi­sion.

Spier­ings said that no cases of ill­ness have been re­ported so far, and Fon­terra has not re­ceived any com­plaints.

China has now halted the im­port of all milk pow­der from New Zealand, ac­cord­ing to Reuters, which cited New Zealand’s trade min­is­ter, Tim Groser.

The New Zealand dol­lar dropped to its low­est level in a year against its US coun­ter­part on Mon­day. In con­trast, Chi­nese dairy com­pa­nies re­ported a rise in their share prices: for ex­am­ple, Royal Dairy Co, based in Guangxi Zhuang au­ton­o­mous re­gion, surged 7.32 per­cent and closed at 14.52 yuan ($2.37).

Con­sumer con­fi­dence in for­eign-branded for­mu­las has de­clined sharply in the wake of the news, and some in­dus­try pro­fes­sion­als say that may pro­vide op­por­tu­ni­ties for do­mes­tic pro­duc­ers to move in on the mar­ket.

Ac­cord­ing to milk in­dus­try ex­pert Wang Ding­mian, for­eign brands hold a share of al­most 60 per­cent of China’s baby for­mula mar­ket. In the first half of this year, China im­ported 445,000 met­ric tons of raw milk pow­der, with ap­prox­i­mately 80 per­cent com­ing from New Zealand. Fon­terra sup­plied 70 per­cent of the raw milk pow­der im­ported from New Zealand over the same pe­riod. China is New Zealand’s largest trad­ing part­ner.

Con­sumers said the in­ci­dent has at­tracted wide at­ten­tion be­cause most of the prod­ucts in­volved are stage 2 in­fant for­mula, which is in high de­mand in China.

“Many young mothers in China stop breast­feed­ing their chil­dren when they are around 12 months old and opt for stage 2 baby for­mu­las,” said Feng Yanyun, a Shang­hai res­i­dent who has a 2-year-old son.

Taken off the shelves

Retailers were quick to move to counter the threat. Car­refour China or­dered the re­moval of ques­tion­able batches of Dumex in­fant for­mu­las from the shelves of its more than 100 Chi­nese main­land stores on Mon­day.

“Some of the prod­ucts on the shelves be­longed to the 12 batches. They have now been re­moved,” said a spokesman for Car­refour in Shang­hai who would only give his sur­name, Ji.

How­ever, he said Car­refour had not re­ceived no­tices or­der­ing Wa­haha or Coca-Cola prod­ucts off the shelves, or any re­call no­tices from the sup­pli­ers.

“We’ll keep in close touch with the mu­nic­i­pal qual­ity and mar­ket watch­dogs and take mea­sures ac­cord­ing to their in­struc­tions,” said Ji.

Wu Aiqin, a sales clerk at an E-mart store in Shang­hai’s Huangpu dis­trict, said rel­e­vant batches of Dumex milk pow­der were re­moved from the shelves on Mon­day.

How­ever, Dumex in­fant for­mu­las were still on sale at a Wal-Mart on Lu­ji­a­bang Road, where they oc­cu­pied more than one-third of the avail­able shelf space for in­fant for­mu­las.

“We have not re­ceived any no­tice to with­draw Dumex prod­ucts,” said the sales­clerk, who gave her sur­name as Zhao. Al­though the prod­ucts were pro­duced in May and June, they do not be­long to the 12 ques­tion­able batches.

Dumex for­mu­las were also on sale at an out­let of Mo­gob­aby, a chain store that spe­cial­izes in ma­ter­nity and baby prod­ucts, lo­cated in Shang­hai’s Songjiang dis­trict, ac­cord­ing to a sales clerk who only gave her sur­name as Zhao.

“If cus­tomers bought the Dumex prod­ucts with the batch num­bers de­tailed in the com­pany’s state­ment, they can bring them to our stores for ex­change or re­turn them for a full re­fund,” she said.

Many store man­agers on Taobao, China’s lead­ing e-com­merce plat­form, who pro­vide in­fant for­mu­las pur­chased over­seas, said their busi­ness has been af­fected by the scare.

“The sales vol­ume slumped yes­ter­day and to­day af­ter the news about Fon­terra ex­ploded. On aver­age, I sell 650 tins of Dumex Stage 2 ev­ery month. Yes­ter­day I sold just six and to­day I haven’t sold any,” said a store man­ager, who asked to be iden­ti­fied sim­ply as Bar­bara, on Mon­day.

Busi­ness was also af­fected at on­line stores sell­ing Kari­care baby for­mu­las, af­ter the Aus­tralia-based baby for­mula maker Nu­tri­cia, also a Danone sub­sidiary, re­called three batches of its Kari­care in­fant for­mula from the New Zealand mar­ket.

Kari­care is a lead­ing baby for­mula pro­ducer in New Zealand, boast­ing 72 per­cent of the mar­ket share in the coun­try, ac­cord­ing to its of­fi­cial web­site.

The prod­ucts re­called in New Zealand are: In­fant For­mula Stage 1 (0-6 months) with the batch num­bers 3169 and 3170, and Kari­are Gold+ Fol­low On For­mula Stage 2 (6-12 months) with the batch num­ber D3183.

China’s quar­an­tine au­thor­i­ties said the three batches have not been im­ported to China through nor­mal trade chan­nels, but warned con­sumers to check the batch num­bers if they have re­cently brought any of the for­mula from New Zealand or bought the prod­ucts through unau­tho­rized chan­nels on­line.

China’s top qual­ity watch­dog is­sued a no­tice early on Mon­day morn­ing, ad­vis­ing par­ents not to feed in­fants Kari­care Stage 1 and 2 prod­ucts to min­i­mize risks.

“Nearly 100 cus­tomers had spo­ken to me by noon­time to­day. All of them were ask­ing about the safety of our prod­ucts, and no one bought any,” said a store man­ager on the taobao plat­form.

“Al­though I in­sisted the prod­ucts in my store don’t be­long to those prob­lem­atic batches, and even at­tached pho­tos of the batch num­bers on the bot­tom of the tins, I can’t win the trust of the con­sumers,” she said.

The Shang­hai-based on­line store has an aver­age monthly sales vol­ume of more than 200 tins of Kari­care prod­ucts, but didn’t sell a sin­gle tin on Sun­day or Mon­day.

Food in­dus­try failings

Al­though, con­fi­dence in for­eign­branded in­fant for­mu­las has been shaken, many Chi­nese are still hes­i­tant about turn­ing to do­mes­tic brands.

Fan Hua, an as­so­ciate in the Bei­jing of­fice of a US law firm, chose En­famil, an in­fant for­mula brand made by Mead John­son & Co of the US, for his 9-mon­thold boy.

“I will pay more at­ten­tion to the sources and test­ing re­sults of im­ported baby for­mu­las be­fore mak­ing a pur­chase, rather than tak­ing it for granted that for­eign brands are safe. But the scan­dal will not af­fect my de­ci­sion to buy im­ported for­mula milk,” he said.

Like many Chi­nese con­sumers, Fan has lost con­fi­dence in do­mes­tic dairy brands be­cause of con­cerns over food safety. The Chi­nese food in­dus­try lacks govern­ment su­per­vi­sion, while non­govern­men­tal or­ga­ni­za­tions do not have the abil­ity to blow the whis­tle on po­ten­tial prob­lems, he said.

The in­dus­try’s failings have prompted many par­ents to buy for­eign in­fant for­mu­las, but con­sumers are still wary. “The lat­est scan­dal will not change for­eign brands’ monopoly of the mar­ket,” said Wang Ding­mian.

China’s dairy in­dus­try has suf­fered a cri­sis of con­fi­dence since 2008, when Sanlu Group was found to have added the toxic chem­i­cal melamine, of­ten used in the pro­duc­tion of plas­tics, to its milk pow­der to boost its ap­par­ent pro­tein con­tent.

This year, some ma­jor com­pa­nies have at­tempted to re­build con­sumer con­fi­dence and boost their pres­ence in the do­mes­tic dairy in­dus­try through merg­ers and re­struc­tur­ing.

In June, China Meng­niu Dairy Co Ltd, one of the largest dairy en­ter­prises in the coun­try, paid $1.6 bil­lion to ac­quire a 75 per­cent stake in the do­mes­tic baby for­mula maker Yashili In­ter­na­tional Hold­ings Ltd. In July, a ma­jor com­peti­tor, In­ner Mon­go­lia Yili In­dus­trial Group Co Ltd, signed a strate­gic co­op­er­a­tion agree­ment with Dairy Farm­ers of Amer­ica.

How­ever, some in­dus­try ex­perts ar­gue it’s wrong to be­lieve that dairy com­pa­nies will im­prove their brand im­age and re­duce safety prob­lems by in­creas­ing in size.

“Our dairy com­pa­nies are not ca­pa­ble of run­ning a large en­ter­prise. Be­cause the man­age­ment is not up to the job, merg­ers and ac­qui­si­tions will be­come a heavy bur­den for them and in­crease their risks,” said Wang.

Fan also noted that Chi­nese dairy com­pa­nies are un­likely to be­come more trust­wor­thy by ac­quir­ing, or merg­ing with, a for­eign coun­ter­part. “Their fu­ture de­pends on whether or not the Chi­nese com­pa­nies al­low their for­eign part­ner in­de­pen­dence in de­ci­sion-mak­ing, man­age­ment and prod­uct in­spec­tion. Oth­er­wise, they will only ruin the for­eign brand through a merger or ac­qui­si­tion,” he said. Con­tact the writ­ers at wang­shan­shan@ chi­ and jiangx­ue­qing@ chi­ Meng Jing and Tang Yue in Bei­jing, Ren Zhe and Chen Lili in Shang­hai con­trib­uted to this story.

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