China thinks big about dairy industry
Print Edition
CHINA yesterday announced plans to build up a handful of large producers of infant formula in its latest effort to revive an industry still seeking to recover from a tainted milk scandal.
Dairies will be encouraged to merge to form more competitive producers and will receive financial support, a State Council statement said.
Plans call for creating 10 producers by next year with at least 2 billion yuan (US$322 million) in annual revenue and three to five by 2018 with revenue of 5 billion yuan.
To realize such goals, the plan stipulates several policy measures, including strict rules and regulations for industry access and production, Xinhua news agency reported.
However, administrative approval process for mergers and acquisitions in the sector will be simplified, with authorities strengthening fiscal, taxation and financial support for relevant mergers and acquisitions.
Policy measures concerning land allocation will also be put in place, according to the government’s plan.
China’s dairies have been on the defensive since a 2008 scandal over tainted formula that killed at least six babies.
It prompted many parents to switch to imported brands over fears for their children’s health.
Domestic brands lost market share to suppliers from New Zealand, Australia, Europe and elsewhere, setting back government efforts to improve its dairy industry.
The government wants to restore consumer faith in Chinese formula and will enforce “strict quality management,” the State Council statement said.
In the 2008 scandal, some milk was found to contain melamine, a chemical that can cause kidney damage and other injuries. Unscrupulous suppliers added it to watered-down supplies to pass tests for levels of protein in the milk.
The brand at the center of the scandal, Sanlu, was broken up and regulators overhauled industry supervision. But that failed to reassure parents.
The reputation of imported brands is so much stronger that customers have been prepared to pay up to three times the price of Chinese milk for them.
Last August, regulators fined five foreign milk suppliers and one from Hong Kong a total of US$108 million on charges they violated China’s anti-monopoly law by setting minimum retail prices for stores.
In May, the Chinese product quality agency announced that only milk products from foreign sources that are registered with the government can be imported.
A list issued by the Administration for Quality Supervision, Inspection and Quarantine showed foreign brands including European units of Abbot Laboratories, Mead Johnson Nutrition Co and Nestle Group had registered.
An industry group in New Zealand said at that time only six of the country’s 13 suppliers were approved.
The chairman of the New Zealand Infant Formula Exporters Association said that might result in some shipments to China being blocked.
In May, the Beijing government unveiled plans to give 10.8 million yuan to a local brand, Sanyuan Group, to develop “safe and healthy infant milk powder,” according to Chinese news reports.
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