June 11, 2009

China's Mengniu Dairy, one of the domestic companies found to have sold melamine-tainted milk products last year, said on Wednesday (Jun 10) its sales were 20 percent lower than normal in the first five months of 2009.

However, consumers were returning to more typical buying patterns for dairy products and the impact of the scandal was "basically over", Yang Wenjun, the chief executive officer of Mengniu Dairy, told reporters on the sidelines of the company's annual meeting in Hong Kong.

The milk scandal in late 2008 resulted in the deaths of at least six infants and sickened almost 300,000 children after they drank infant formula contaminated with melamine which can falsify protein test results.

Yang added that prices of Mengniu's dairy products were stable so far and he expected them to remain so for the rest of the year.

Meanwhile, Jiao Shuge, chairman of Mengniu, said demand for daily necessities, such as dairy products, has been less affected than spending on more discretionary items during China's economic slowdown.

In February, Chinese authorities had concluded that an additive osteoblast milk protein (OMP) in Mengniu's milk products was safe to consume. However, the OMP incident caused a drop in sales of Mengniu products, thereby losing some market share to rivals Yili and Bright Dairy, according to analysts.

Mengniu posted an RMB948.6 million (US$138.8 million) loss in 2008 compared with the RMB935.8 million (US$136.9 million) profits earned in the previous year.