/CHINA: Contamination and fines, a heavy blow to the international dairy groups

CHINA: Contamination and fines, a heavy blow to the international dairy groups

Chinese parents do not know what milk to buy. A new health scandal hit Sunday on formulas baby milk powder sold in supermarkets in China. However, this time, they are foreign brands which are involved.

Serious negligence for Fonterra

After three days of crisis, Theo Spierings, CEO of Fonterra world number one, said Wednesday it had withdrawn from the market all contaminated products. Indeed, the New Zealand group had caused panic among Chinese parents announcing last Sunday contamination of some of its products by bacteria which may increase the risk of botulism, resulting in paralysis of the infant, and sometimes even death. The alert was actually due to hygiene negligence in a line of one of the Fonterra’s factories, forcing many of its customers using this ingredient to withdraw their products from the shelves. Among them, Danone, through its brands Karicare and Dumex, the U.S. Coca-Cola and the Chinese Wahaha Group.

On Monday, while the French food group asked to send back “as a precaution” several batches of products in China, Thailand, Malaysia, Hong Kong and New Zealand, Theo Spierings rushed to China to limit the damage by apologizing to consumers. The group has suffered the wrath of the authorities in Beijing but also the government of Auckland, because the dollar plunged after the crisis. Remember that Fonterra is the first company in New Zealand and the dairy industry alone weighs 7% of GDP.

milkDairy curse continues

This scandal is an unprecedented setback for the brand, which had yet built a reputation for quality among Chinese parents stung by dairy scandals in 2008 and 2010. At that time, the contamination of locally manufactured products had several deaths resulting in a distrust of Chinese brands to benefit from their foreign competitors, up to feed a contraband traffic of milk powder from Hong Kong and mainland China.

Heavy accumulation for international groups

In addition to this history, the Chinese authorities have imposed a fine of $ 110 million (approximately EUR 83 million) for six food groups including Danone, Mead Johnson or Fonterra, as part of an investigation for price fixing.

The French group will have to pay $ 28 million against 33 million for Mead Johnson. The Abbot Laboratories brands, FrieslandCampina and Biostime International are also involved.

Experts might almost suspect that the Chinese government have developed a larger project to support the consumption of local dairy products. It is true that Chinese products are neglected since the tainted milk scandal that has killed at least six children in 2008, and foreign manufacturers now account for nearly half of sales in China, a market estimated at $ 25 billion by the year 2017.

The groups Mead Johnson Biostime, Abbott and Fonterra announced that they would not contest the fine.

This scandal would leave it up to the new groups in the Chinese milk powder market?

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2016-11-23T15:49:06+00:00 August 9th, 2013|

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