Chinese dairy firms fight to regain market after tainted milk scandal

China has ordered dairy firms to apply for new production licenses this year in a move designed to improve product quality and safety in an industry plagued by scandals.
Firms, including baby formula makers, that fail to obtain new permits will be forced to close, the official Xinhua news agency said, citing the head of the General Administration of Quality Supervision, Inspection and Quarantine.
"The requirement aims to improve quality and safety in the dairy industry," Zhi Shuping, the quality supervision minister, told a conference in Beijing.
Consumer confidence in the dairy industry plummeted in 2008 after it was revealed that the industrial chemical melamine was being added to watered-down milk to make its protein content seem higher and boost profits. Infant formula made from tainted milk sickened hundreds of thousands.
Melamine, which is used to make plastics and fertilizers, has also been found in pet food, eggs and fish feed although not in levels considered dangerous to humans. The chemical, which, like protein, is high in nitrogen, fooled inspectors. It can cause kidney stones and kidney failure.
Despite a sweeping crackdown that included the execution of a dairy farmer and a milk salesman, melamine continues to show up in Chinese dairy products.
The Chinese dairy industry is suffering as a result of a series of product quality scandals that have given a bigger share of the market to imported milk powder products, an official from the Ministry of Agriculture said.
Ma Ying, vice director of the ministry's dairy management office, said in an interview with China National Radio that the country imported 370,600 tons of milk powder in the first 11 months of 2010.
Ma said domestic brand milk powder had a 60 percent market share before the melamine scandal in 2008, in which the chemical was used to give an appearance of higher protein content. Now, domestic and imported brands occupy the same market share.
The industry was hit last year after parents complained that their children suffered from premature puberty after consuming milk powder products by Synutra International, despite health authorities saying there was no connection between the symptoms and the milk powder.
Ma said 340,000 jobs would be affected by importing more than 100,000 tons of milk powder.
Wang Dingmian, former executive director of the China Dairy Industry Association, said that in terms of nutritional value and quality, most local brands are on the same level as foreign brands. Wang said foreign brands raised their prices three times in 2010, giving imported milk powder products an average profit of 80 percent.
Chairman of the China Dairy Industry Association Song Kungang believes that the move will not only speed up the dairy industry reshuffle but will also lead to general rise in dairy prices.
Song explained that, based on legitimate production license, some firms have to be improved and gain a large investment. In addition, all products manufactured need to pass inspection before hitting the market, which will increase the costs from inspection. Finally, at present, raw material prices are increasing greatly.
Song Kungang believes that these cost increases will be passed on to consumers in the end.
The domestic dairy industry is experiencing intense competition. Some companies worry price adjustment will lead to loss of market share, and many companies are putting efforts into developing new products for greater profits.
By People's Daily Online