China's milk fiasco

It may be several weeks before the enormity of the milk poisoning tragedy in China is fully understood. After the past 2 weeks however we’ve seen enough of the detail to see that the practices of milk suppliers and dairy companies are an inherent part of a system of product cheating that puts segments of its population at high risk of death.

The dairy company that was initially fingered as the culprit – Sanlu, which is 43% owned by New Zealand dairy farmers through Fonterra – was originally aware in March this year that there were complaints about babies getting ill after consuming its infant formula products. Sanlu’s board melamine was in its products a week before the Beijing Olympic Games but claims it was working with local authorities to manage a product recall. It wasn’t until a frustrated Fonterra told the NZ Government of the issue, and that the NZ Prime Minister then told her Chinese counterpart, that the problem got the right level of attention in China. All that while, unsuspecting parents were feeding their children poisonous products.

That was clearly the tip of the iceberg. A fifth of China’s 109 registered dairy companies have now been implicated, and the list of suspected products has spread beyond baby infant formula milk powder to mainstream consumer products such as yoghurt, ice cream and liquid milk. Officials added to the apparent confusion for consumers, saying originally that liquid milk was safe, but late last week milk sold in liquid form by three leading Chinese dairies was found to be contaminated with melamine.

This melamine-injection racket is reportedly well entrenched as a practice used to dud the tests of protein levels in a range of products made from watered-down milk. The same chemical was found in exported pet food last year and blamed for killing thousands of cats and dogs in the United States. The tragedy has partially lifted the lid on a culture of corner-cutting, copying and cheating that is well understood by many who’ve done business in the country as a risk with pretty much any manufacturing in China.

This is not the first scandal involving the deaths of children at the hands of criminals cutting corners to weasel a few more yuan out of the dairy market – a higher death toll was reported in 2004 when infant formula products were sold without adequate nutritional content, causing widespread malnutrition in babies.

It is perhaps ghoulish to think that the outcomes of this tragedy hold opportunity. Chinese mothers will surely find it hard to trust local infant formula brands and a wider range of tainted dairy and milk products, so there may be a retreat towards the safety of fully-imported products. The wider risk is that the trust for the whole dairy category is placed at risk at a time when the prospects for dairy were being strongly influenced by the future demand from Chinese consumers.

The tragedy of trust is huge for the government of China – it has encouraged its people to consume higher levels of dairy product as a cornerstone of a societal nutritional policy, yet failed to back that up with a food safety regime befitting the trust it was demanding.

The safety crisis ravaging China's dairy sector shows the country faces a very long haul before a reform drive can bring order to a chaotic and deadly food industry which threatens its own consumers and those of its trading partners. The culture of corner-cutting and cost minimisation for the sake of profit will plague this and other sectors of the food industry until China’s consumers wage their own effective revolution.