Discovery adds to woes of baby formula firms in China

Bloomberg

Fonterra Cooperative Group Ltd.’s warnings of tainted ingredients in some products of the world’s largest dairy exporter is the latest blow to baby formula sellers amid Chinese consumers’ concerns about food safety.

The possible threat of some baby formula with the contaminated ingredients stocked on shop shelves comes as Chinese consumers are still reeling from the milk powder adulterated with melamine that killed six babies in 2008. This adds to the woes of consumers in China’s almost $16 billion infant formula market, where foreign manufacturers have faced allegations of charging high prices.

“The whole industry is racked with systemic problems,” said Matthew Crabbe, head of Asia-Pacific research at Mintel Group. “This is a further dent in consumer confidence.”

In a commentary titled “Remembering the Fonterra lesson” by the official People’s Daily, the publication wrote that China needs to more effectively supervise foreign milk imports and strictly check all milk imports, regardless of the brand.

“There is a belief among some Chinese consumers that foreign brands are absolutely safe, yet, as one incident after another indicates, even well-known brands may not always be the most reliable,” it wrote.

Fonterra’s announcement is the latest in a string of incidents plaguing China’s milk industry.

“There is only going to be increased scrutiny on foreign milk powder brands from now on,” said James Roy, senior analyst at China Market Research Group in Shanghai. “You see a renewed push by the government to crack down on safety issues, and there is an impetus to show that these issues are not solely linked to domestic brands.”