China Consumer

Communication crisis

Mengniu in the firing line once again

Communication crisis

For stepmothers everywhere

This week, China’s leading dairy firms Mengniu, Yili and Sanyuan all announced that they’d raised prices for their dairy products. The companies attributed the increase in price to rising labour and logistics costs, as well as more expensive raw materials.

Industry observers say that this is not the real reason.

Wang Dingmian, president of Guangzhou Dairy Association, told the South China Morning Post that raw milk prices have been rising slowly and that prices of other raw materials like white sugar have actually gone down.

The price increase, says Wang, is more to do with funding spending on public relations to counter all the negative publicity that continues to plague the milk industry.

Certainly, the PR teams haven’t been getting much rest. Just last month, executives at Mengniu were back in action, saying the firm had destroyed a batch of contaminated products containing aflatoxin, a toxic chemical that can cause severe liver damage. The company says the contamination was caused by mouldy fodder fed to cows.

Aflatoxin occurs naturally and is produced by common types of fungi. It can then infect crops before (and after) harvesting, entering the food chain through animal feed. Milk, eggs and meat have sometimes been contaminated.

Mengniu, the country’s largest dairy producer, will be keen for some time away from the headlines. In November, food inspectors in Guangdong said they found high levels of bacteria in one of its ice cream products and in April, 251 students in Shaanxi Province became sick after drinking Mengniu milk in their school cafeteria.

Needless to say, the Inner Mongolia-based dairy maker was also one of the companies at the centre of China’s original tainted milk scandal in 2008. This debacle led to 6 babies dying and 300,000 becoming sick, reports TIME. The cause: a widespread use of melamine, an industrial chemical, in infant milk formula. The illegal use of melamine was pure profiteering – the chemical shaves the dairy firms’ costs, by boosting the protein levels in watered-down milk.

The news of the latest incident sent thousands of angry consumers to their Sina Weibo last month. Mengniu quickly became the most-searched item, and almost five million posts complaining about the quality of its products were published.

One favoured illustration online showed a cartoon of fairy tale character Snow White poisoned, with a Mengniu beverage in hand. The caption below it states: “Mengniu, the stepmother’s new choice”.

Another much-communicated ribbing was that the company’s slogan should change from “One half kilogram of milk each day, makes Chinese people strong” to “One half kilogram of milk each day, makes Chinese people dead”.

“Basically, confidence in the dairy industry and even the food safety authorities has been eaten up,” says Professor Zhu Yi at China Agricultural University. “Raw milk and dairy farmers were blamed for the melamine-tainted milk scandal three years ago, yet time has passed and the public has not seen much progress. No explanation, no matter how scientific it sounds, can make up for the disappointment.”

In an opinion piece, the Economic Observer said that Mengniu desperately needed a wake-up call. “I have lost track of how many times Mengniu has apologised to consumers. From the melamine incident to present, this dairy company has been involved in countless scandals,” the author wrote. “Mengniu, how can you still be so arrogant? Perhaps it is because the regulatory authorities are deliberately turning a blind eye.”

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.