August 12, 2013

China to step up monitoring of milk powder producers

Following the whey protein product contamination scare sparked by New Zealand's Fonterra last week, China said it will enhance monitoring of milk powder producers and severely punish companies found to have quality or safety problems.

China's Food and Drug Administration called on firms to improve their management and local supervisory bodies to fully implement rules governing the sector.

"A lack of responsibility, unclear policies and lax supervision led to recent safety issues over infant milk formula, and it is necessary to improve the quality and safety of milk powder to regain consumer confidence," the agency stated.

Public trust was damaged by a 2008 scandal in China in which six infants died and thousands became ill after drinking milk tainted with melamine.

Fonterra, the world's biggest dairy exporter, has recalled some batches of milk formula in China and elsewhere after the New Zealand co-operative said it had discovered whey protein products that contained a harmful bacteria.

To help its monitoring, the Food and Drug Administration would set up a team of specialists to work with local supervisory bodies to make sure they met their responsibilities and eliminated risks at the earliest stages, the statement said. A key task was to promote a better understanding of the need for quality and safety in milk powder production, it added.

Foreign milk powder producers have come under scrutiny in China in recent weeks for pricing as well as health issues. Six milk powder producers were hit with a total of US$110 million in penalties for price fixing and anti-competitive behaviour after a four-month investigation.  Fonterra was among those penalised, with a fine of RMB4 million ($653,300), the smallest of the six.

The six milk powder firms are Mead Johnson, France's Danone, New Zealand's Fonterra, Abbott Laboratories, Dutch dairy cooperative FrieslandCampina and Hong Kong-listed Biostime International Holdings. Three other firms, Nestle-owned Wyeth, Japan's Meiji Holdings and Zhejiang Beingmate were probed but were not fined because "they cooperated with the investigation, provided important evidence and carried out active self-rectification", according to reports by Xinhua.

China's infant formula market is set to grow to US$25 billion by 2017 from US$12.4 billion in 2012, according to data from Euromonitor. Foreign brands account for about half of total sales and can sell for more than double the price of local formula.