Government pushes formula makers to raise product quality
China’s baby milk sector is still trying to recover from a loss of confidence caused by a safety scandal 10 years ago, as Li Hongyang reports.
The government’s campaign to regulate the baby formula milk industry and restore consumer confidence which was badly damaged by a scandal in 2008 has seen nearly 50 percent of product categories eliminated from the market in the past two years.
The sale of newly made unregistered products was banned from Jan 1, under a regulation released by the China Food and Drug Administration in June 2016. However, existing stock can be sold until it reaches its expiration date.
Now, qualified companies, irrespective of whether they are domestic or foreign, are allowed to register three brands with three age categories, resulting in nine products each in total.
Sales of milk formula have risen rapidly since 2015, when the Chinese market accounted for 43 percent of global sales, and will continue to rise until at least 2020, according to market researcher Euromonitor International.
Meanwhile, the Qianzhan Industry Research Institute, an independent think tank in Beijing, said sales reached 73 billion yuan ($11.5 billion) in 2015.
The CFDA’s website said the regulation is intended to reduce the number of formulas that are similar but claim to have different functions, and also force unregulated companies whose products are made by a third party out of the market.
In 2016, an estimated 2,000 formulas made by 103 domestic companies were available in the Chinese market, but by the end of last year, the number had fallen to 743 products from 93 companies registered with the CFDA.
In addition, there were 209 formulas made overseas by 37 registered foreign manufacturers, according to the administration’s media and publicity office.
Song Liang, an independent dairy expert, said the regulation has raised the bar for China’s formula milk industry because it will eliminate a number of smaller brands and unregistered manufacturers, which will force larger companies such as Feihe International Inc, Yili Group and Beingmate Baby & Child Food Co to focus more on product research and brand reputation.
“This will help the government to tighten its control of the industry and boost consumer confidence in local brands,” he said.
Scandal
In 2008, public confidence was severely damaged when six children died after drinking infant formula made by Sanlu Group in Hebei province that had been tainted with Melamine, a compound used in the production of plastics. According to China’s health authority, about 54,000 babies were hospitalized.
Since then, many parents have used foreign-made formulas, which they either buy online or acquire from relatives and students living overseas.
A 2013 poll conducted by Sohu, an online news portal, showed that 89.54 percent of the 15,870 respondents chose formulas made overseas.
Zhang, a 25-year-old mother in Beijing who preferred not to give her full name, said she has never considered giving her baby Chinese-made formula.
“When I was pregnant, I started doing research on an app called Baby Tree. Then I discovered Meitun, a trustworthy cross-border e-commerce platform, and bought German-made Aptamil for my son, who is now age 1. After about two months, he adapted to the formula well,” she said.
“I have confidence in locally made products such as mobile phones or cars, but not formula, which is my baby’s main food. No mother can risk her baby’s health on brands without strong reputations.”
Dai Meijuan, a mother in Changchun, Jilin province, also gave her daughter Aptamil, but the child didn’t like it, so she changed to Nutrilon, made in the Netherlands.
“I don’t completely understand the English instructions on the packaging, but foreign brands are always considered better than local ones. I don’t know why, it’s just a kind of preference even though I know some local brands are fine,” she said.
However, the large number of parents looking to buy formula from overseas has resulted in some foreign store chains taking measures to limit purchases.
Zhang Xin, who studies in Australia, began purchasing formula for friends in China two years ago. She said Woolworths, an international retail chain, imposed a limit of two units per customer per purchase last year.
Moreover, the formulas, especially Aptamil and A2, are not usually available on the shelf, which means customers have to ask an assistant for the product.
Laying foundations
Song, the independent expert, conceded that changing public perceptions of Chinese-made formulas will be a long-term task.
“It will take quite a long time for us to see the effects of the regulation, but it lays the foundation for the industry’s image in the future and targets the attitudes of future parents. Overseas brands are usually cheaper and have better reputations, but local brands are catching up,” he said, referring to the inefficient techniques and machinery that result in higher production costs for domestically made formula and push prices higher.
Mao Xueying, a professor of food science and nutritional engineering at China Agricultural University in Beijing, said: “The right one is the best one. People’s dietary structures vary from nation to nation. So the problem is that overseas formula may lack certain nutritional components or even contain too many. For example, a lack of iodine in some overseas formulas may present problems for babies in China.”
Ling, a former employee of Fonterra, a nutrition company in New Zealand that was a major shareholder in Sanlu during the 2008 scandal, said Chinese-made formulas are now high-quality products.
“Every dairy industry insider knows that a decade has passed since the scandal and now the standards of both formula manufacture and inspection in China could not be higher. But that’s of little importance because it is the consumers who should know this and recognize the products. To restore confidence, authoritative international third-party inspectors should be introduced into the nation’s formula market. Boasting about our own formulas won’t do the trick,” said Ling, who preferred to only give her surname.
James Tong, chairman of the Australian-Chinese Primary Industry Council, agreed with Ling’s comments and backed her idea of independent inspections.
“Pollution and a lack of arable land in China mean it is reasonable for local brands to build factories overseas and they should be encouraged to do so. However, because more products will be made overseas it will be necessary to have a third-party, global quality-tracking platform,” he said.
He added that it is essential to regulate manufacturers, and the industry urgently needs to reassure consumers because that will be key to rebuilding confidence.
“It’s strange that even a decade after the scandal, Chinese parents still don’t use local formula because both domestic and foreign-made products used to have quality problems. However, a recent case involving Lactalis Group, an international dairy company based in France, may offer some clues on how to handle adversity,” he said.
On Jan 12, the Lactalis website said the company had recalled all infant formula products manufactured and conditioned in its facility in Craon, France, following suspicions that some were contaminated with salmonella agona.
Two days later, 37 infants were reported to have been taken ill after drinking the formula, according to The Guardian, a British newspaper.
“The company reacted swiftly by quickly identifying the factory involved, followed by an instant recall of products and offers of compensation,” Tong said.
To restore consumer confidence, he suggested that instead of investing billions into advertising their charitable donations to the poor, Chinese formula manufacturers should establish a joint insurance fund to deal with breaches of safety in the industry nationwide.
“It is important to rebuild the image of Chinese companies as professional and responsible. We can’t place the entire responsibility on the government, whose main role is that of a watchdog,” he said.
“Finding a solution to the problem is an experiment in reshaping the ‘Made in China’ brand. If we can make this breakthrough, I think problems in other industries could be solved quickly in the future.”
Foreign brands are always considered better than local ones. I don’t know why, it’s just a kind of preference even though I know some local brands are fine.” Dai Meijuan, a mother in Jilin province who gives her daughter a formula made in the Netherlands