Currently browsing posts about: Chinese-infant-formula

I saw this notice of Nestlé closing a baby formula factory in Ireland.   I wondered why.

Nestlé cited a significant downward trend in demand for infant nutrition products in the Greater China region as the main driver behind the factory closure, thanks to a sharp decline in the birth rate projected in 2023—9 million down from 18 million in 2016, according to Statista.  The market, which had previously been reliant on imported infant formula products, is also seeing rapid growth in locally-produced products, according to the manufacturer.

What?

• Nestlé’s factory in Ireland makes formula exclusively for sale in China.?
• China’s birth rate has dropped by half just since 2016?

The infant formula market is one bizarre entity.  It depends entirely on these factors:

1. How many mothers breastfeed their infants.
2. How many babies are born.
3. How many breastfeeding mothers can be induced to switch to formula.
4. Ho long caretakers can be induced to continue using formula.

All of this pushes the formula industry to undermine breastfeeding.

Nestlé is moving its factory to China where it must think it can sell even more.

Maybe the Irish factory can make formula for Europe.   Scotland, for example, is worried about the high cost of formula—surely a supply-and-demand problem, at least in part.

I would never have predicted that infant formula, of all things, would become the poster child for the down side of globalization.  Look at all the issues:

Price fixing

The Chinese government has just fined six infant formula companies for fixing prices:

• Mead Johnson (US): $33 million
• Dumex/Danone (France): $28 million
• Biostime (Hong Kong): $27 million
• Abbott Labs (US): $13 million
•  Royal FrieslandCampina (The Netherlands): $8 million
•  Fonterra (New Zealand): $700,000

The fines may seem severe but the Chinese bought $12.7 billion worth of infant formula in 2012 and are expected to buy $18.4 billion in 2014.

Botulism contamination

Fonterra, the New Zealand manufacturer of infant formula contaminated with the type of bacteria that cause botulism, says it’s sorry.

We deeply apologize to the people who have been affected by the issue.

Food safety is our first and foremost interest.

That’s  what they all say when something like this happens.

The company noticed botulinum contamination in March but did not identify the contaminating strain or notify consumers until last week.  That’s also typical.

Fonterra made $15.7 billion in sales last year, more than half of it from selling dairy foods to China.  Other big customers are in Australia, Malaysia, New Zealand, Saudi Arabia, Thailand and Vietnam.

China has now stopped importing Fonterra’ powdered infant formula.  This alone was worth nearly $1.9 billion last year.

Recall that Fonterra was a part owner of the Chinese company that made infant formula laced with melamine—the formula that made more than 300,000 babies sick.  Six died.  That happened in 2008, with dire consequences for Chinese formula manufacturers.

Distrust of Chinese infant formula

Since then, the Chinese have become suspicious of local infant formula and are buying foreign infant formula to the point of scarcity.  The new scare makes that situation even worse.

In Hong Kong, officials have been cracking down on foreign infant formula smugglers.

Joe Nocera of the New York Times attributes the scandal to three problems with China’s rapidly expanding economy:

• Complete lack of faith in Chinese companies.
• Corner-cutting deeply ingrained in Chinese business culture, with no government regulatory enforcement.
• Bad incentives.

He has a Slide Show to back this up.

Other consequences

Decline in breastfeeding.  Rates of breastfeeding in China are declining.  Do Western infant formula companies have anything to do with this?

Environmental Pollution.  I was at an agriculture meeting in New Zealand a few years ago and got an earful about what it means to convert a sheep-growing country to one focused on dairy cattle: pristine to polluted.

Alas, the externalized costs of globalization.

I’m shocked, shocked.  China says foreign makers of infant formulas are fixing prices (did you ever wonder why the prices of different brands of formula or baby food were all the same?).

Foreign milk powder surged in popularity in China after a 2008 scandal in which at least six infants died and 300,000 children fell ill after drinking domestic milk powder formula tainted with a toxic chemical, melamine. Virtually all major Chinese makers of milk powder were found to have tainted products..

Chinese newspapers say that since 2008, foreign milk powder companies have increased prices by around 30%. Since 2008, the market share held by foreign milk powder has doubled from 30% to 60%.

In response, two makers of infant formulas, Nestlé (no relation) and Danone, have promised to cut prices.  In the meantime, Chinese authorities are investigating price setting policies.

Some analysts see the inquiry as possibly part of a broader Chinese plan to increase consumption of local infant-milk products….Foreign brands may also soon have to rely on their Chinese partners if they want greater access to the Chinese market. The Chinese government has expressed an interest in bringing the supply chain under the control of Chinese firms as part of its goal of reducing the number of local infant formula producers to 10 from more than 200 within two years.

I’ve been writing about Chinese infant formula issues for years.

Breast-feeding, anyone?

Remember last year’s scandal about the 300,000 Chinese infants who developed kidney disease after being fed infant formula laced with melamine?  That anyone would put melamine into infant formula was shocking on its own (although the previous year’s scandal over melamine in pet food ought to have been fair warning, as I explained in my book, Pet Food Politics).

Even more shocking is that the Sanlu infant formula company knew about problems with its milk long before it issued a recall, in part because it did not want to embarrass the country just prior to the start of the Olympic games in Beijing.

Now, Chinese authorities have executed two men deemed responsible for adding melamine to the milk powder sold to Sanlu.  The Sanlu manager was given a life jail sentence, and 18 others involved with the Sanlu company also have been jailed for up to 15 years.

One can always debate whether the punishment fits the crime but a BBC press account quotes a lawyer who laid the blame on

an inadequate regulatory system…It’s hard to understand why these people are give such harsh punishment because generally speaking… there is a lack of monitoring and regulation…It’s the food supervision and inspection authorities that are responsible for this.

Congress, take notice: pass that food safety bill now!