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Tainted Chinese dairies turn to foreign cows
Global Times | January 04, 2012 21:55
By Andrei Ni
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Illustration: Liu Rui


New Zealand  produce is famous for its freshness, taste and quality. So it's little wonder that some shrewd Chinese businesses falsely claim to be flogging top Kiwi products.

Xinhua reported recently that Nouriz, a "New Zealand" brand of baby formula, which sells well in China, was found to be wholly owned by Chinese. Nouriz is touted as one of the top formula brands in New Zealand. However, it is nowhere to be found in the country's supermarkets or on its big online shopping websites.

It didn't take long before suspicious Chinese consumers discovered that Nouriz sells its formula only in China, and is not an authentic foreign brand. This revelation caused an online uproar, with many regretting their purchases of the pricey formula.

At a time when indigenous dairy makers are mired in one scandal after another, young, middle-class Chinese parents have no choice but to pay more for branded imported formulas, which is generally considered safer for newborns.

But it would be wrong to call Nouriz a "bogus foreign brand," or to berate it for "ripping off" Chinese buyers. After all, the company that owns the brand is indeed registered in New Zealand. What caused the controversy is that it is not directly involved in the production of formula, but has outsourced the job to a local dairy producer.

Barring the fact that Nouriz has misled consumers with fraudulent advertising, the company's business is totally legal. Its raw milk and other ingredients are all produced and processed in New Zealand. The formula has passed tests by that nation's food and drug authorities and also those of China's quarantine watchdog.

So why the fuss over the company's background? Is that really so important?

To Chinese consumers, the answer is a definite yes. The enormous media exposure the Nouriz saga has received is a reminder that in China, only 100 percent foreign-owned formula brands are fully trusted. The moment Nouriz was revealed to be a "fake," all the money spent on it seemed, to the average Chinese consumer, to have been wasted.

This consumer mentality, as reflected by the online complaints, is not a product of Chinese groveling before everything foreign, as some critics claim, but one of deep, knee-jerk mistrust of homegrown dairy brands, which have yet to recover from a string of past abuses, the most infamous being the melamine scandal in 2008 that killed six infants and sickened tens of thousands of others.

As things stand, the Chinese public will continue to favor foreign dairy brands over indigenous ones for a long time to come. Therefore, imported formula brands whether "authentic" or not, will win an increasing market share as long as they are more reliable and can establish their reputation through word-of-mouth marketing in an age of online shopping.

The statistics back this. The domestic market share of imported formula has been consistently growing for several years, and it reached more than 50 percent last year.

Given the sheer number of foreign dairy firms operating in China, it's safe to assume that quite a few of them are adopting the same sleight of hand as Nouriz did to make their products more attractive. Nouriz won't be the last to pull this trick.

Faced with challenges from foreign competitors, Chinese dairy companies have turned to mergers and acquisitions to leverage their economies of scale in recent years. But expansion won't help them turn the tables in a market where their products are presumed to be inferior to imported brands.

Some consumers have quipped that although it pains them to pay more for foreign-made formula, the pain at least won't come back to haunt them in the future, whereas the opposite is true of homegrown formula brands.

If there's anything positive about the Nouriz episode, it's that it may sting troubled domestic dairy giants such as Mengniu into taking efforts to stem their loss of market share. If even an obscure rival like Nouriz can bite into their sales, they need to seriously explore the ways to restore public trust in them.

The author is a freelance writer in Shanghai.

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