Blame it on western demand for cheap food or lack of domestic controls in place, but the current milk crisis has led to the public scrutiny on food products as never before.
While manufacturers are striving to better their standards to compete in the global marketplace, China has become a pariah in the food industry landscape.
What this means for the food industry in general, and manufacturers specifically, is a cautionary tale – the lure of economies of scale, and greener pastures, should be treaded carefully by upping the surveillance.
Local manufacturers lead the dairy sector in China. The Inner Mongolia Mengniu Milk Industry Group ranked first in 2006, with a 17% value share. Euromonitor International forecasts the Chinese dairy sector to grow at a CAGR of 9% over the 2007-2012 period.
Although still relatively small when compared to domestic players, international firms have increasingly secured a more influential role in the market. Danone ranked fifth in drinking milk products with a value share of 4.5%, followed by Nestlé with 2.1%.
However, the scene is set to change with the current milk safety lapse. Resurrecting the image of the dairy industry to tempt new entrants will be a mighty challenge.
Impact and effect
Although there have been many food accidents during the past few years, this time the milk formula problem has by far triggered the biggest storm, without sparing even the top players like Mengniu, Yili, Bright and (the now infamous) Sanlu.
“Although not all their products contain melamine, Mengniu, Yili, and Bright are finding themselves in a very critical situation,” said Euromonitor International senior research analyst, Yang Fan.
In response to the crisis so far, 20 countries have banned Chinese dairy products and some have stopped importing Chinese goods with any measure of dairy content.
In Singapore, Euromonitor’s statistics show only 5% of cream, 20% of liquid milk and 0.02% of powdered milk bought by consumers are from China, and local manufacturers’ use of Chinese dairy products is also low.
Even so, trends reveal that retailers are distancing themselves from being associated with Chinese products, not wanting to risk their own public image.
Plugging safety loopholes
Although for many manufactures the top-line impact has been minimal, additional measures to ensure safety have put a strain on their resources.
NTUC FairPrice director of food safety and quality, Chong Nyet Chin, said that the scare has heightened the importance of food safety and the need for quality assurance. It has also highlighted the need for a close relationship of all stakeholders in the industry, from the regulator to manufacturers, importers, suppliers, retailers and customers.
Attesting to that, the Agri-Food and Veterinary Authority of Singapore’s (AVA) spokesman Goh Shih Yong, said that “food safety is a joint responsibility. There are many opportunities for pathogens and chemicals to sneak into our food at various stages along the food value chain from production, processing, packaging and distribution, and right through to consumption,” he said.
Apart from the food safety authority’s stringent import controls, the food producers, manufacturers, importers and distributors must do their part to uphold the high food safety standards by complying with regulatory requirements and adopting good agricultural and manufacturing practices.
As well as this, food safety assurance standards, such as the Hazard Analysis Critical Control Points (HACCP), that are designed to ensure the quality and safety of their products, must be adhered to.
Some industry pundits believe that food manufacturers should check on the links in the food production chain stretching from ‘farm to fork’ and therefore resort to importing from reliable suppliers, checking suppliers’ data and doing more risk analysis to ensure that food remains safe along the entire value chain.
Key lessons
Countries which had depended on imported products and raw materials from China, are on high alert. However, some have had their strategies heading in the right direction all along.
In the case of NTUC, the company “has been adopting a strategy of diversified sourcing to ensure our customers have a stable supply of products. Some of the countries that we currently import milk and dairy products from include Australia, NZ and Malaysia,” said NTUC’s Chong Nyet Chin.
Other manufacturers and retailers have put up notices at stores to assure customers that they have removed Chinese made milk and milk products from their supplies. Customer service hotlines are also in place for feedback about any associated concerns.
At this time of the crisis, Singapore Food industries (SFI), one of the largest food distributors and manufacturers in Singapore, has begun preliminary talks with the Chinese government to develop a disease-free food zone, with comprehensive food safety measures.
SFI chief executive officer, Roger Yeo Kok Tong, explained that “these cluster champions will put in the quality control system through different levels of the value chain – from its feed, grandparent stock, breeders, abattoir, processors and to the ground output at the end.”
In Indonesia, the Food and Drug Monitoring authority (BPOM) has announced that it has implemented stricter measures to address the issue. Hefty penalties and jail terms have been put in place for stores carrying banned products.
As FOOD Magazine went to print, 12 Chinese products had been found to contain melamine in Indonesia. Of these, six had been taken off the shelves and the other six were said to have been illegally imported into the country in the first place.
Euromonitors’ Yang Fan highlighted the lessons to be learned by manufacturers, saying that “although consumer confidence in international brands is generally higher than domestic brands, it is still very vulnerable and can be destroyed overnight.
“All manufacturers have to be highly careful to maintain high levels of quality control in the future. Otherwise they will face the same crisis as domestic players.”
Manali Pattnaik is a freelance journalist for FOOD Magazine.