Milk formula rules no worry for overseas firms

Source:Global Times Published: 2013-7-25 21:23:01

Last week, Westland Milk Products, New Zealand's second largest dairy cooperative company, announced in Shanghai the launch of its infant nutritional base powders in the Chinese market.

The news came after the Chinese government tightened controls over the domestic infant formula market. Last month, nine ministries and commissions including the China Food and Drug Administration (CFDA) and the Ministry of Industry and Information Technology (MIIT) jointly issued a raft of new policies. These included banning local companies from repackaging bulk-imported wholesale formula for the retail market; requiring companies that export baby formula to China to register with the Chinese authorities; and introducing oversight of the baby formula market that is of the same standard as that governing pharmaceuticals.

While some people believe such moves will limit the sale of foreign baby formula in China and help rebuild public confidence in the domestic dairy sector, New Zealand companies see opportunities for boosting their businesses in the country.

Fundamentally speaking, these regulatory measures are cracking down on counterfeit formula brands or those falsely labeled as products made overseas. For example, the New Zealand Infant Formula Exporters Association said in April that only 20 out of the 200 "New Zealand" baby formula brands sold in China are genuine. Therefore, these moves won't have any impact on consumer confidence in genuine foreign brands, but will only strengthen their share of the world's largest formula market.

Simply put, if you are a reputable producer in the Chinese formula market, there is nothing to worry about. Even the recent price-fixing investigation seems unlikely to undermine Chinese parents' faith in the quality of foreign formula brands. The National Development and Reform Commission (NDRC), the country's top economic planner, recently initiated an antimonopoly investigation into several formula companies that were accused of manipulating and inflating prices. Afterward, several big foreign makers of infant formula rapidly dropped their prices.

The message is clear, but it would hardly affect consumer trust in these products as long as their quality is still ensured. Since the 2008 melamine scandal in the domestic dairy industry, Chinese parents are so concerned about what to feed their babies that they don't care about the price and are prepared to pay a lot more for quality. That's exactly the foundation of the current booming market.

Quality is also the answer to regaining consumer confidence in Chinese producers, which has already become a hot topic in the domestic dairy sector. The challenge is significant because Chinese milk powder producers need to look at not just one part of the supply chain, but need to start from the milk quality on the farm. If the starting point is low-quality milk, even if the processing standard is high, the finished products will still be affected.

The article was compiled by Global Times reporter Wang Jiamei based on an interview with Rod Quin, CEO of Westland Milk Products.

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