Milk scares open door for Danish dairy investment
ASIA BRIEFING: FOOD SAFETY is never long out of the headlines in China, and this time it’s the dairy industry in the wars again.
Dairy is not traditionally part of the Chinese adult diet, but it has made major inroads in recent years as rising incomes allow people to start widening their food tastes, but there must be plenty of people in China wondering why they ever wanted to indulge in produce from a cow.
Despite repeated efforts to introduce strict legislation and severe punishment for those who breach the rules, it has been one scandal after another in the country’s milk industry, ever since 2008 when infant formula laced with the industrial chemical melamine killed at least six children and made nearly 300,000 ill.
Last week Bright Dairy Food Co, or Guangming in Chinese, posted a recall notice on its website after customers complained online of bad smelling and discoloured liquid in the company’s 950ml cartons of Ubest milk.
A mechanical error had tainted the batch with alkaline water and the Shanghai Bureau of Quality and Technical Supervision said it was investigating the case. Bright Dairy said it would provide door-to-door apologies to customers who bought the bad milk and carry out a strict factory inspection.
It marked just the latest body blow to the dairy industry, still reeling after the country’s biggest-selling dairy, Inner Mongolia Yili Industrial Group, pulled six months’ worth of infant formula from shelves over mercury contamination just a couple of weeks ago.
Where some see disaster, others opportunity. At the same time as Chinese milk was souring rapidly, Denmark’s Arla Foods announced it was buying a six per cent stake in China’s biggest milk producer, Mengniu Dairy, making it the firm’s second largest shareholder after state-owned COFCO.
Mengniu Dairy will develop and market Arla Foods’ products in China and other countries, and it was also selected to set up a China-Denmark milk technology centre, according to the company.
Arla is the fifth biggest player in the global dairy industry, with revenues of €7.5 billion, and is the Nordic region’s biggest milk producer. Arla will take part in the management of Mengniu as a whole and introduce a Danish-style pasture management system.
For the Chinese, it represents a way of lifting standards, a traditional technology transfer story.
“As Mengniu’s largest strategic shareholder, COFCO fully supports Mengniu’s global partnership strategy. In the medium and long term, it will serve as an ideal model for the Chinese dairy industry,” said Ning Gaoning, chairman of the COFCO Group.