October 16, 2008


China's Yili spent US$14.6 million on melamine testing


Inner Mongolia-based Yili Industrial Group Co., China's largest dairy producer said they spent 100 million yuan (US$14.6 million) for melamine detection in milk after the scandal which tainted the nation's dairy industry.


Yili said the money went to buying equipment and testing facilities since competitor Sanlu Group Co. admitted on Sept. 11 that Sanlu-brand infant formula and milk powder were adulterated with melamine, Yili's Chairman Pan Gang said during a tour of his factory at Hohhot city in northern China's Inner Mongolia region.

Melamine, a chemical used in plastics and for tanning leather, was linked to the deaths of four infants and sickened 53,000 children in China. The country's US$20 billion dairy industry was shattered after 22 milk manufacturers including Yili were found to have melamine, prompting more than 20 countries to ban Chinese milk and candy.


Pan said sales have plunged since the scandal broke last month and a third quarter report loss is very likely.


Some Chinese milk collectors, the middlemen between dairy farmers and bottling plants, add melamine to milk to boost the protein levels in tests and bolster profit margins. Privately held Sanlu, 43 percent owned by New Zealand's Fonterra Cooperative Group Ltd., was the first producer to admit its products were adulterated.


Yili's products resumed selling on store shelves on Sept. 24 after China's quality inspector cleared them of melamine. Overall, the chemical was found in less than 1 percent of Yili's products, Pan said today.


The company's sales decline "had not been as bad as expected,'' said Yili's Executive President Zhang Jianqiu, stating "sales have recovered 70 percent to 80 percent now,'' without further elaboration. 

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