Fears Over Safety of Infant Formula Resurface After New Product Recall
BEIJING—The discovery of unusual levels of mercury in Chinese-produced infant formula reignited fears about the safety of the country's scandal-ridden dairy industry, and underlined the severe challenges the government faces in improving food safety.
Inner Mongolia Yili Industrial Group Co., 600887.SH -4.71% China's top dairy producer by sales, said it recalled some infant formula products after government inspectors discovered the mercury contamination.
The company said the General Administration of Quality Supervision, Inspection and Quarantine found the metallic element in several of the company's Quanyou-brand infant formulas manufactured from November to last month. It said the company began the recall on Wednesday.
China's food-quality control watchdog said it tested 715 infant formula products, covering all domestic producers, and that Yili is the only company known to have a mercury contamination problem.
China's dairy industry has undergone an overhaul since 2008, when six babies died and 300,000 others were poisoned by milk tainted with the industrial chemical melamine. Yili was among 22 milk producers involved in what was the country's biggest food-poisoning scandal.
The scope of the latest problem hasn't been determined. Yili's infant formula is sold nationally. Yili spokesmen couldn't be reached Friday. Representatives for the Inner Mongolia safety administration weren't available.
Exposure to mercury can permanently damage vital organs, including the kidneys and the brain, causing tremors, memory problems and changes of vision and hearing, according to the U.S. Centers for Disease Control and Prevention, which also states that young children are more sensitive to mercury than adults.
In the aftermath of the tainted-milk tragedy, Chinese courts sentenced two people to death on charges of manufacturing and selling fake or substandard products, and handed lengthy jail terms to several others. In addition, the government created a new food-safety agency to boost quality control and oversight of agriculture.
Dairy companies, responding to government incentives to modernize the agricultural sector and restore public faith in the food industry, have been forming large-scale dairy farms by importing cattle or acquiring smaller farms. The goal is to simplify fragmented supply chains.
Traditionally, big dairies like Yili have relied on a large network of small-scale dairy farmers, some with only one or two cows, for their supply of raw milk. These farmers raise different types of cattle on various types of feed, which affect milk quality and open the supply chain to additional problems.
In December, safety officials announced they found excess levels of the chemical aflatoxin in milk made by China Mengniu Dairy Co., 2319.HK +6.82% the country's second-largest dairy producer by sales behind Yili. A spokesman for the Chinese company said Mengniu would boost oversight of feed, ensuring higher-quality hay, the product that led to the toxin's spike.
Farmers are among China's poorest people, and food-safety violations are often driven by a desperate desire for increased profit. The chemical melamine used in the 2008 scandal mimics the properties of protein, allowing producers to add water to milk without apparently diluting its nutritional value.
Yet Yili's contamination, industry insiders say, isn't likely related to the pursuit of financial gain, as the chemical doesn't mask or create any milk-like properties.
"The most plausible way for it to have come into the milk powder is through feed or water originating from contaminated soil or water sources," said David Mahon, managing director of Mahon China Investment Management, a Beijing-based investment firm focused on Chinese agriculture.
Yili's dairy farms in Inner Mongolia straddle lands that have in recent years been exploited by mining companies for their coal and rare earths—minerals used in high-technology products.
China's breakneck economic growth, propelled by manufacturing, has ravaged the environment. Factories spew out hazardous metallic chemicals into land and water that find their way into manufactured products, like cosmetics, and to agricultural goods like tea, according to studies from environmental advocacy group Greenpeace.
The deep-seated environmental problems help to explain the persistence of food-safety scandals, despite constant pledges by the government to improve food safety, and periodic crackdowns against violators.
Dairy companies have been required to buy equipment designed to enhance testing and catch contamination, but it isn't designed for mercury testing, said Ian Dixon, a manager of Hubei Kan-Pak Ice Cream Manufacturing Co. "Regularly testing for mercury would be like testing for gold—it's something that isn't in milk," Mr. Dixon said.
Online, where Chinese consumers typically voice their complaints, discontent has emerged. "Why is it that our children still cannot drink safe milk in this country?" one user said on the popular Chinese Twitter-like microblogging site Sina Weibo.
Recalls like the one at Yili hurt consumer trust and cause sales of imported infant powder, already high in China, to surge, said Yang Dali, a University of Chicago professor and an expert on China's food regulation. Low-income families feel as though they are hit hardest, because they can't afford imported products, which cost at least 40% more than domestically produced brands, Mr. Yang said.
Before Yili's recent incident, consumers had regained some trust of the domestic milk industry. Yili's profits nearly doubled in 2011, reaching 1.8 billion yuan ($283 million) on sales of 37.45 billion yuan, up 25% from a year earlier. In China's infant formula market, Yili had the fourth-largest market share, with 7.9%, in 2010, according to the most recent data available from research firm Euromonitor International.
Sales of infant formula jumped to 62 billion yuan in 2011, up 22% from a year earlier, according to Euromintor.
Responding to the latest development, Yili's shares fell by the maximum 10% allowed by the Shanghai Stock Exchange to 21.85 yuan in early trading Friday. At the midday break, the benchmark Shanghai Composite Index was up 0.2% at 2299.77.
Shares of Mengniu were down 3.4% at 19.76 yuan in Hong Kong.
Write to Laurie Burkitt at laurie.burkitt@wsj.com
Inner Mongolia Yili Industrial Group Co., 600887.SH -4.71% China's top dairy producer by sales, said it recalled some infant formula products after government inspectors discovered the mercury contamination.
The company said the General Administration of Quality Supervision, Inspection and Quarantine found the metallic element in several of the company's Quanyou-brand infant formulas manufactured from November to last month. It said the company began the recall on Wednesday.
China's food-quality control watchdog said it tested 715 infant formula products, covering all domestic producers, and that Yili is the only company known to have a mercury contamination problem.
China's dairy industry has undergone an overhaul since 2008, when six babies died and 300,000 others were poisoned by milk tainted with the industrial chemical melamine. Yili was among 22 milk producers involved in what was the country's biggest food-poisoning scandal.
The scope of the latest problem hasn't been determined. Yili's infant formula is sold nationally. Yili spokesmen couldn't be reached Friday. Representatives for the Inner Mongolia safety administration weren't available.
Exposure to mercury can permanently damage vital organs, including the kidneys and the brain, causing tremors, memory problems and changes of vision and hearing, according to the U.S. Centers for Disease Control and Prevention, which also states that young children are more sensitive to mercury than adults.
In the aftermath of the tainted-milk tragedy, Chinese courts sentenced two people to death on charges of manufacturing and selling fake or substandard products, and handed lengthy jail terms to several others. In addition, the government created a new food-safety agency to boost quality control and oversight of agriculture.
Dairy companies, responding to government incentives to modernize the agricultural sector and restore public faith in the food industry, have been forming large-scale dairy farms by importing cattle or acquiring smaller farms. The goal is to simplify fragmented supply chains.
Traditionally, big dairies like Yili have relied on a large network of small-scale dairy farmers, some with only one or two cows, for their supply of raw milk. These farmers raise different types of cattle on various types of feed, which affect milk quality and open the supply chain to additional problems.
In December, safety officials announced they found excess levels of the chemical aflatoxin in milk made by China Mengniu Dairy Co., 2319.HK +6.82% the country's second-largest dairy producer by sales behind Yili. A spokesman for the Chinese company said Mengniu would boost oversight of feed, ensuring higher-quality hay, the product that led to the toxin's spike.
Farmers are among China's poorest people, and food-safety violations are often driven by a desperate desire for increased profit. The chemical melamine used in the 2008 scandal mimics the properties of protein, allowing producers to add water to milk without apparently diluting its nutritional value.
Yet Yili's contamination, industry insiders say, isn't likely related to the pursuit of financial gain, as the chemical doesn't mask or create any milk-like properties.
"The most plausible way for it to have come into the milk powder is through feed or water originating from contaminated soil or water sources," said David Mahon, managing director of Mahon China Investment Management, a Beijing-based investment firm focused on Chinese agriculture.
Yili's dairy farms in Inner Mongolia straddle lands that have in recent years been exploited by mining companies for their coal and rare earths—minerals used in high-technology products.
China's breakneck economic growth, propelled by manufacturing, has ravaged the environment. Factories spew out hazardous metallic chemicals into land and water that find their way into manufactured products, like cosmetics, and to agricultural goods like tea, according to studies from environmental advocacy group Greenpeace.
The deep-seated environmental problems help to explain the persistence of food-safety scandals, despite constant pledges by the government to improve food safety, and periodic crackdowns against violators.
Dairy companies have been required to buy equipment designed to enhance testing and catch contamination, but it isn't designed for mercury testing, said Ian Dixon, a manager of Hubei Kan-Pak Ice Cream Manufacturing Co. "Regularly testing for mercury would be like testing for gold—it's something that isn't in milk," Mr. Dixon said.
Online, where Chinese consumers typically voice their complaints, discontent has emerged. "Why is it that our children still cannot drink safe milk in this country?" one user said on the popular Chinese Twitter-like microblogging site Sina Weibo.
Recalls like the one at Yili hurt consumer trust and cause sales of imported infant powder, already high in China, to surge, said Yang Dali, a University of Chicago professor and an expert on China's food regulation. Low-income families feel as though they are hit hardest, because they can't afford imported products, which cost at least 40% more than domestically produced brands, Mr. Yang said.
Before Yili's recent incident, consumers had regained some trust of the domestic milk industry. Yili's profits nearly doubled in 2011, reaching 1.8 billion yuan ($283 million) on sales of 37.45 billion yuan, up 25% from a year earlier. In China's infant formula market, Yili had the fourth-largest market share, with 7.9%, in 2010, according to the most recent data available from research firm Euromonitor International.
Sales of infant formula jumped to 62 billion yuan in 2011, up 22% from a year earlier, according to Euromintor.
Responding to the latest development, Yili's shares fell by the maximum 10% allowed by the Shanghai Stock Exchange to 21.85 yuan in early trading Friday. At the midday break, the benchmark Shanghai Composite Index was up 0.2% at 2299.77.
Shares of Mengniu were down 3.4% at 19.76 yuan in Hong Kong.
Write to Laurie Burkitt at laurie.burkitt@wsj.com
0 Response to "Fears Over Safety of Infant Formula Resurface After New Product Recall"
Post a Comment