More problems for Fonterra in China

Controls on infant formula sales outlets tightened in China

China has ordered that all infant formula sold on the mainland is to be sold in pharmacies or in shops that are qualified to sell medicines

Radio NZ,

23 August, 2013

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The China Association of International Trade announced that domestic and foreign baby formula will be sold in 20 pharmacies in Beijing and Jiangsu province from October, in a pilot programme that will be extended to 20,000 pharmacies in 500 cities by 2015.

It's seen as another step to improve consumer confidence in formula products, while weeding out fake brands.

However, some dairy industry operators say changing sales channels will do little to improve safety standards or allay consumer fears in the wake of the latest Fonterra contamination scare because the quality of baby formula products is decided by manufacturing processes and the quality of the milk and raw materials.

China National Radio has reported that the Ministry of Industry and Information Technology plans to merge or close a large number of mainland dairies that make baby formula. The number will fall from the current 128 to 50 by the end of 2018.

Fonterra reveals another China hiccup

Fonterra Cooperative Group, beset by food standards issues after the bacteria that can cause botulism was found in its supply chain, had another stumble in China in May when 42 tonnes of milk powder were held up over elevated nitrate levels.

TV1,

21 August, 2013

The milk powder was among 163 batches of foods and cosmetics prevented from entering China by that nation's quarantine officials in May, according to a July 29 report on the China Daily website.

A spokesman for Fonterra confirmed that the 42 tonnes of product was tested in New Zealand, where it met specifications, before being shipped to China where it was tested again and failed to meet

Chinese testing specifications. Fonterra didn't disclose the problem at the time.

"This can happen, for example, when different laboratories and testing methodologies are applied," the spokesman said in an emailed statement.

"In this case, we chose to accept the Chinese laboratory results and implemented the necessary processes and documentation that is required for advising regulators in both China and New Zealand of non-compliant product."

The discovery comes in the same week rival Westland Milk had export certificates revoked for a small quantity of lactoferrin after unacceptable levels of nitrates were discovered in four consignments.

Fonterra is attempting to reclaim its reputation for producing safe dairy products after the discovery of bacteria in 38 metric tonnes of whey protein concentrate manufactured at its Hautapu plant, used to manufacture infant formula, juice and dairy beverages, yoghurt, body building powder, and animal stock food.

The bacteria find sparked a recall of products and sent Fonterra into damage control with chief executive Theo Spierings flying straight to the company's key market, China, as several import bans were imposed on the dairy products.

Fonterra's NZ Milk managing director Gary Romano, who fronted local media over the food scare, resigned last week, and two other executives have been put on leave.

At the same time, a Sri Lankan health union won a two-week ban on all Fonterra products amid claims the dairy exporter's food was showing traces of a nitrate inhibitor known as DCD, which kicked off an earlier international scare at the start of the year.

Food quality issues have also sent the government into overdrive, as it rushes to pass legislation allowing a hasty ministerial inquiry, so Prime Minister John Key can go to China to reassure consumers in the world's most populous nation.

The Ministry for Primary Industries is also reviewing the botulism scare to see whether Fonterra breached any food safety laws or regulations, and Fonterra itself is holding two separate inquiries.

Labour Party primary industries spokesman Damian O'Connor said he was "alarmed" to hear of the latest contamination.

"Revelations about this ban on Fonterra milk powder come at a time of intense international scrutiny of our dairy industry," he said in a statement.

The repeated issues with dairy products haven't deterred buyers, with 56,173 metric tonnes of dairy products sold on Fonterra's online auction, GlobalDairyTrade, today, and a 2.3 percent lift in the average trade-weighted price across all products.

Fonterra sold 3.9 million tonnes of dairy products in the 2012 financial year.

Units in the Fonterra Shareholders' Fund fell 0.6 percent to $6.91 today.

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