China Consumer

Spoilt milk

New Zealand tries to calm China’s dairy fears

SKOREA/

Kiwi PM Key to apologise in China

Botulism is a disease typically caused by ingesting food that contains the botulinum toxin, one of the most poisonous substances known to man. Left untreated, it can lead to paralysis and death.

In short, it isn’t something that you want stirred into your milk.

So when New Zealand’s Fonterra revealed that some of its dairy products contained a bacteria that can cause botulism it soon became a PR disaster of catastrophic proportions, especially for a company that has looked to profit from an image as a provider of safe milk.

Problems were first found in March when a routine safety check reported unusual results in batches of whey protein. But it wasn’t until the end of July that tests confirmed clostridium, part of a family of organisms which can cause the botulinum toxin, reports the Economic Observer.

The newpaper reports Fonterra said it discovered contamination in whey shipped to customers including Coca-Cola, Danone and China’s Wahaha, and then used to make infant formula, sports drinks and animal feed. A number of countries – including China, Russia and Vietnam – immediately suspended the import of Fonterra’s products.

The contamination was blamed on a dirty pipe. Shortly after the news was released, Fonterra’s CEO Theo Spierings rushed to Beijing to apologise and it then emerged that New Zealand’s prime minister, John Key also plans to visit China later in the year with a view to offering a personal apology to consumers.

“It’s just going to be important in their [Chinese] culture that I go up there and offer an apology,” Key told the New Zealand’s TV3, reports China Daily.

Kiwi companies in general will want to keep the Chinese happy. China is now New Zealand’s second largest market, accounting for 15% of the country’s exports, says the Economic Observer. Food and drink accounts for half of these sales, with milk the dominant product.

Fonterra has already survived an association with one of China’s most notorious food contaminations in recent years. In 2008, thousands of children were made sick by melamine (a chemical used to make plastic) used in infant formula from milk supplied by the Sanlu Group, a dairy firm in which Fonterra had a shareholding (see WiC6). Fonterra actually blew the whistle on Sanlu after local officials failed to alert the government to the contamination.

Fonterra subsequently scaled back its Chinese operations, offloading its infant formula production to American firm Abbot Laboratories. But the aftermath of the scandal proved beneficial. Chinese parents started to shun locally produced milk powder in favour of imported alternatives. Fonterra returned to China in 2010 with its own brands.

Whether Fonterra can recover from the latest scare depends on how Chinese parents choose to respond. On the one hand, the company came clean on the problem and appears to be doing its best to rectify the damage, including roping in the prime minister to say sorry. At this stage, there are no reports of any ill health linked to consumption of the affected products.

On the other hand, it has faced criticism for failing to take more action as soon as it found abnormalities earlier in the year.

And this week there was another blow for the industry when dairy products from Westland Milk sent to China were quarantined after concerns were raised about nitrate levels. Westland – New Zealand’s second-largest dairy co-operative after Fonterra – said a small amount of lactoferrin powder with elevated nitrate levels had been exported. “Technical experts have looked closely at this issue and believe any food safety risk to Chinese consumers is negligible because the quantities of lactoferrin used in consumer products was very small,” Kiwi government officials told media.

Nonetheless, the two cases look likely to damage the dairy industry’s reputation, with some Chinese consumers now even more uncertain about what to buy. As one weibo user lamented: “We no longer trust domestic food and now we are starting not to trust foreign food as well.”

Keeping track: New Zealand authorities have confirmed that the contaminated whey protein concentrate made by dairy firm Fonterra doesn’t contain Clostridium botulinum and will not produce dangerous botulism toxins. The botulism scare that broke out earlier this month caused an international incident as it affected eight Fonterra customers with products including big brand infant formula and sports drinks. (August 30, 2013)


© ChinTell Ltd. All rights reserved.

Exclusively 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.