Melamine in Milk - Update Tainted Chinese Dairy Products
China Current Affairs Report 10 October 2008 Note: This is an update of the original report that was published on 22 September 2008
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Melamine in Milk: Tainted Chinese Dairy Products Current Affairs Report
22 September 2008
Background In mid-September, about 1,700 Chinese infants were diagnosed with kidney stones and other renal disease. A government investigation determined the cause was melamine contamination in milk formula manufactured by the Sanlu Group, a state-owned company and one of the top domestic brands. Melamine is normally used in plastics and fertilizers, but was used by Sanlu to boost watered-down milk's apparent protein content. It appeared unlikely that the problem was limited to one company, so the General Administration of Quality Supervision, Inspection and Quarantine tested samples of milk formula produced by other companies. The results showed the widespread presence of Melamine in most major Chinese brands. Additional testing of liquid milk and milk products such as yogurt showed that infants and toddlers were not the only victims, and that adults have also been consuming Melamine-laced products manufactured by the top Chinese dairy companies including the 2008 Olympics Sponsor Yili Industrial Group. No products involving foreign brands – whether manufactured in China or imported – have yet tested positive for Melamine. Once a growth success story, the Chinese dairy industry is in disarray and China is once again in the news for the wrong reasons. To date nearly 13,000children have been hospitalized. It is important to note that breast-feeding rates are low in China, and formula milk is used widely, at all socio-economic levels of society. Domestic Brands Involved
According to test results posted as of 19th September, the government has tested 491 batches of baby milk formula from 109 brands. The results show that 69 batches of milk formula from 22 brands contain melamine
Sanlu’s products that tested positive are the most toxic, containing an average of 2564 mg/kg, which is sufficient to cause renal disease amongst children
Sanlu is a state-owned company founded in 1956, and a minority stake is owned by Fonterra, a
New Zealand company
As the largest Chinese milk formula manufacturer, Sanlu had about 18% of the total market share
before the contamination news broke
Its products dominated the medium and lower-end market – thus its victims are typically those
children whose families are unlikely to be able to afford high medical bills
Products from another 21 brands were found to contain melamine in quantities between 0.09mg / kg to 619mg / kg and many famous brands such as Yili, Saint, Mengniu, and Yashili etc., are involved
It is estimated that the total market share of these brands before this crisis was 50% - 60%
The government also tested liquid milk samples from 5 major brands: Mengniu, Yili, Guangming, Sanyuan and Nestle, which together account for a 70% share of the liquid milk and dairy products market
24 batches of liquid milk from Mengniu, Yili, and Guangming were found to contain melamine in
quantities of 0.765mg / kg to 8.4mg / kg
According to the results posted as of 30th September, the government has tested 265 batches of other
milk products from 154 companies
The results show that 31 batches of products from 20 companies contain melamine
All Sanlu products were found to contain melamine between 1.3mg/kg to 6196mg/kg
Products of localized brands such as Shijiazhuang Baocheng and Tangshan Longyuan also contain
very high melamine, up to 5600 mg/kg
A few products of famous brands such as Mengniu and Yili were also found to contain melamine
of between 6mg/kg to 25mg/kg
Since 24th September, the government has test 212 batches of milk powders and 2093 batches of milk
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Limited which produced after 14th September. The results show that none of the products contained
Melamine. Foreign Brands Involved All the milk products of foreign brands are free of melamine according to tests conducted so far by the
Chinese (PRC) government However, some products by these brands were found to contain minor traces of melamine
according to tests conducted in Hong Kong, Singapore and Korea – On 22nd September, a Nestle dairy product produced in China tested positive for melamine
in a test by an institution in Hong Kong, but this has not been confirmed by Nestle or the Hong Kong government
– In 24th September, a Nestle pure milk product produced in Qingdao tested positive for melamine in a test by the Hong Kong government, and Nestle subsequently recalled this product from Hong Kong
– A Nestle dairy product tested positive for very minor melamine traces in a test by the Taiwan government, and subsequently was removed from the shelves of supermarkets and shops in Taiwan
These products are not mentioned on ‘the list’ in China therefore the implied government stand is that all foreign branded products and still considered to be safe
– Therefore, these products are still available on the shelves in Mainland China
Downstream Products and Brands Involved Test of Chinese-made downstream dairy products such as chocolate, cake, cream, biscuits, candies etc.
in other countries have indicated that these are also contaminated These downstream products include foreign brands as well as well-known Chinese confectionary
brands No test results for such downstream products have been released in China by the government or
any other organization A famous candy brand- Super Rabbit – was tested to contain melamine in both Singapore and
Hong Kong, and was subsequently banned in those two markets and a number of others around the world
Chinese-made foreign branded products found to contain Melamine in tests in other countries include Lotte cakes and biscuits , Cadbury cookies and chocolate and Heinz Formula Cereal (tested positive in Hong Kong and Korea)
– Lotte recalled the relevant products in Korea and suspended biscuit production in China Other involved brands include Lipton of Unilever, Pocky Men of Ezaki Glico and Nabisco of Kraft
Government Reaction According to media reports, Sanlu and the Chinese government were slow to move and did so only
after the New Zealand government went public
Sanlu officials were aware of this problem for well over a month
Fonterra, a New Zealand company, has a ~43% stake in Sanlu and three board seats, and had been
trying to get Sanlu and local government officials to take action without success
The government has arrested 22 executives of the Sanlu Group
It is likely that the government will make a show out of prosecuting and possibly executing some
officials to make a point, as it did after a similar product safety crisis in 2007
Sanlu and 46 other dairy companies have had their exemption from government food safety inspections cancelled
Sanlu’s infant formula had been certified as an "inspection-exempt product" for three years (since
December 2005) by the General Administration for Quality Supervision, Inspection, and
Quarantine (AQSIQ)
Such certification meant "the products are exempted from quality monitoring and inspection
conducted by the government," and that "internal inspection should be reinforced"
The designation “national famous brand” has been revoked from Sanlu, Mengniu, Yili and
Guangming
The government has announced it will monitor the price of milk formula closely, and intervene if
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Limited prices rise quickly due to the expected shortage in the market once all the affected brands and products have been removed from shelves
Since 12th, September, the government is providing free testing and treatment for babies
Adults do not receive the same benefits Market Reaction The Sanlu Group is likely to collapse because of this scandal and recent reports suggest a takeover of
Sanlu by Beijing Sanyuan (see below)
Reports from earlier this year suggested that Sanlu planned an IPO in the second half of 2008 –
this is now impossible
Sanlu’s production has been shut down and its key executives have been arrested
Since most major Chinese brands are involved, many second tier brands not involved in the crisis have
gained market share very rapidly
Beijing Sanyuan benefited most from this crisis: it s brand was citied as the safest Chinese brand
and sales increased by 300%
With the help and coordination of the Central Government, Beijing Sanyuan will acquire Sanlu
and turn itself from a mid-sized local company into one of the largest dairy companies in China
– The acquisition is still under negotiation and further details are unavailable
– Emerging Strategy predicts a deal that would remove any transfer of liability for Sanlu’s
actions from the new owners, limiting prosecution to individual employees of Sanlu rather
than the company as a whole
Other relevant brands apologized officially, recalled all products that tested for Melamine, and committed to compensate consumers for problems caused by these products
Besides the free testing and treatment offered to infants by the government, no details of any
compensation or damages offered to consumers has emerged
In the immediate aftermath of the crisis, major Chinese dairy brands suffered, and it was estimated that ~80% of Chinese brand milk formula had left the shelves of most supermarket chains
As a result, many dairy farmers threw away fresh milk since their customers, the dairy companies,
were in turmoil (e.g., dairy farmers in Hebei province, where Sanlu Group is based, threw away
6000 tons of fresh milk between 14th -16th September).
– Domestic consumers lost confidence in Chinese dairy brands and temporarily suspended all
non-essential dairy-related purchases
However, recent visits by Emerging Strategy researchers to supermarkets in Shanghai suggest that
things are returning to normal
– The government and dairy companies are interested in de-emphasizing the crisis and
putting it behind them as soon as possible, hence all products produced after 14th
September are deemed safe
– Dairy aisles were packed with products from all brands (except Sanlu) and consumers
appeared to be buying all kinds of fresh and downstream dairy products
– By not publishing lists of contaminated downstream products, the Chinese government is
hoping to limit the fallout to ‘a few bad apples’ without tackling the larger issue of lose
quality controls and a hands-off attitude towards large domestic companies that
contributed to the scale of the crisis in the first place
Joint venture plans between foreign and Chinese dairy firms, and perhaps more broadly in the food and beverages sector may be affected
Foreign dairy brands that are ‘clean’ are unlikely to associate themselves with tainted Chinese
brands for the foreseeable future
New food / beverages sector JVs in which the foreign partner has a large but minority stake, and
exercises little control over management and safety decisions (e.g., Fonterra Group’s relationship
with Sanlu) will become highly unlikely
Since none of the foreign brands in China (have yet) tested positive for Melamine, this is a major opportunity for them to enhance their public perception and gain market share at the expense of domestic brands
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Limited Foreign brands such as Nestle have promised not to increase prices at this time, which will help
them strengthen their position in the high-end market, and gives them an opening to expand into
the middle market as well
Lack of Consumer Litigation
Lack of legal consciousness and an incomplete legal system means individual lawsuits due to harmful
products are rare
There is only one lawsuit against Sanlu so far- if this situation occurred in most other countries,
there would have been thousands of lawsuits already filed
It is possible that many consumers have been placated by the government offer of free medical
treatment for infants, and will therefore not bother to take any action
Most of the harmful products were recalled by Sanlu, so not there is little evidence of specific
tainted products that is still in the hands of consumers
Since Sanlu is a state-owned company, the government is likely to control this crisis with
administrative steps rather than conducting, encouraging or allowing actions of a legal nature
The courts are waiting for the official compensation plan prepared by the government, and they
will not accept lawsuits filed until the government has released their plan
Lawyers are facing pressure from the government, and according to some reports it has been
‘suggested’ to them that they only provide legal advice instead of filing any litigation
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Limited
Milk and Yogurt with Melamine
Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Meng Niu
Wulnut Milk 200ml/bag
09-10-2008 0.77
Low-Fat and Calcium-Rich Milk
250ml/box 08-07-2008 0.80
Sterile Whole Milk 250ml/box 09-01-2008 1.00
Low-Fat and Calcium-Rich Milk
250ml/box 08-01-2008 1.50
Breakfast Milk 250ml/bag 08-14-2008 1.90
Breakfast Milk 250ml/box 07-26-2008 2.57
Miaodian 250ml/box 07-28-2008 3.17
Xylitol Yogurt 2kg/bottle 08-06-2008 3.52
Low-Fat and Calcium-Rich Milk
243ml(250g)/bag 09-08-2008 4.20
Yogurt with Whole Fruit
160g/box 09-03-2008 6.80
Yili
Yogurt with Mango and Yellow Peach
125g/box
09-07-2008 0.69
Yogurt with PawPaw and Orange
125g/bottle 09-03-2008 1.02
Pure Milk 220ml/bag 09-13-2008 2.20
De-fatted Milk 250ml/box 08-20-2008 2.90
Pure Milk 242ml/bag 09-06-2008 8.00
Low-Fat and Calcium-Rich Milk
250ml/box 08-19-2008 8.40
Guangming
Original Flavor Yogurt
180g/bag
09-12-2008 0.60
Original Flavor Yogurt
180g/box 09-13-2008 3.41
Original Flavor Yogurt
100g/cup 09-10-2008 3.50
Yogurt with Strawberry
450g/box 09-02-2008 4.80
Probiotics & Cream
190g/bottle 09-08-2008 5.65
Cream & Yogurt (Original Flavor)
580g/bottle 09-09-2008 8.60
From official information available as of Friday 19th September 2008 http://www.aqsiq.gov.cn/zjxw/zjxw/zjftpxw/200809/t20080919_90325.htm
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Limited
Baby Milk Formula with Melamine
Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Sanlu
Sanlu Huiyou II Formula Powder for Toddler 400g/bag
07/02/08 2563.00
Sanlu Huiyou I Formula Powder 400g/bag 05/29/08 1197.00
Sanlu Huiyou III Formula Powder 400g/bag 06/01/08 955.00
Sanlu Beibei Infant Formula Powder 400g/bag 01/30/08 420.82
Sanlu Beibei Infant
Formula Powder(0-
6 months) 400g/bag 162.00
Sanlu U+ Infant Formula Powder 400g/bag 08/07/08 1.40
Sanlu Formula Powder for Toddler 400g/bag 08/26/08 0.70
Panda Kebao
Infant Growth Formula Powder III (Youkang) 900g/can
Panda Kebao image unavailable
08/30/08 619.00
Infant Growth Formula Powder III (Youkang) 400g/bag 08/26/08 534.00
Infant Growth Formula Powder III (Youkang) 900g/can 08/27/08 523.00
Saint
Youcong Infant Formula Powder(0-6 months) 400g/bag
06-19-08 150.00
Youcong Infant Formula Powder 400g/bag 06/20/08 78.81
Youcong Toddler Formula Powder 400g/bag 06/22/08 58.77
Toddler Formula Powder 400g/bag 05/15/08 50.20
Youcong Infant Formula Powder(0-6 months) 400g/bag 03/21/08 41.00
Youcong Infant Growth Formula Powder 400g/bag 07/23/08 19.47
Youcong Toddler Formula Powder 400g/bag 07/24/08 15.10
From official information available as of Tuesday 16th September
http://www.aqsiq.gov.cn/ztlm/nf/qwfb/200809/P020080916818021945309.doc 2008
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Limited Youcong Infant Growth Formula Powder
(30g/bag×10
bags)/box 02/17/08 5.40
Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Gucheng
Youfang Infant Growth Powder (0-6 months) 400g/bag
02/01/08 141.60
Youfang Infant Golden Package Growth Powder (0-6 months) 400g/bag 07/03/08 36.00
Baby Growth Golden Package Healthy Formula (1-3 years old) 400g/bag 08/01/08 33.10
Youfang Infant Growth Powder (6-12 months) 400g/bag 01/13/08 10.10
Yingxiong
Toddler Formula Powder 380g/bag
Yingxiong image unavailable 09/08/08 98.60
Infant Formula Powder II 380g/bag 09/05/08 48.50
Huimin Infant Formula Powder II 400g/bag
09/08/08 79.17
Mengniu
Infant Formula Powder (1-3 years old) 400g/bag
01/09/08 68.20
Infant Formula Powder(6 month to 1 year old infant) 400g/bag 01/14/08 40.90
Infant Formula Powder (0-6 months) 400g/bag 01/08/08 11.10
Special Formula for Children before school years 6×900grams 08/27/08 0.91
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Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Yashili
Golden Stage Infant Formula Powder (1-3 years old) 400g/bag
08-27-08 56.00
Golden Stage Infant Formula Powder II (0-6 months) 400g/bag 06-27-08 50.60
Golden Stage Infant Formula Powder II (6 months to 1 years old) 400g/bag 07-28-08 43.00
Golden Stage Infant Formula Powder II 400g/bottle 06-17-08 31.65
Golden Stage Infant Formula Powder 400g/bag 08/01/08 23.24
Golden Stage Toddler Formula Powder 400g/bag 08/16/08 20.50
Yashili Infant Formula Powder II(0-6 months) 400g/bag 05-15-08 35.70
Infant Formula Powder II 25kg/bag 09/01/08 26.30
Yashili Toddler Formula Powder 25kg/bag 09/03/08 14.30
Ginbis
Infant Formula Powder III 900g/bottle
04/08/08 18.00
Todder Formula Powder II 900g/bottle 09/04/08 3.00
Scient
Golden Package Growing Infant Milk Powder (0-6 months) 400g/box
07-23-08 17.00
Infant Milk Powder I 900g×6bottles 07/03/08 12.50
Growing Infant Milk Powder 401g/bag 08/19/08 7.90
Infant Milk Powder I 900g×6bottles 07/14/08 6.20
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Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Yili Yili Child Milk Powder (1-3 years old)
400g/bag
07-16-08 12.00
Ausmeadow
Anbaby Formula Powder (1-3 years old) 1000g/bottle
09/09/08 10.70
Aner Infant Formula (1-3 years old) 400g/bag 09/09/08 10.40
Anbaby Infant Formula(3-4 months) 1000g/bottle 09/09/08 10.30
Aner Infant Formula
II(7-12 months) 400g/bag 09/04/08 10.00
Anbaby Infant
Formula(0-6
months) 1000g/bottle 09/01/08 9.30
Aner Infant Formula
(0-6 months) 400g/bag 08/21/08 6.30
Leilei
Infant Formula(6-
12 months) 400g/bag
Leilei image unavailable
06/03/08 1.20
Infant Formula III
(1-3 years old) 400g/bag 06/04/08 1.10
Infant Formula I(0-
6 months) 400g/bag 06/08/08 0.53
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Limited
Children’s and Adults’ Supplemental Milk Powder with Melamine
Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Sanlu
Formula with Rich Iron and Zinc
400g/bag
04-03-2008 6196.61
Formula with Rich Iron and Zinc
400g/bag 01-13-2008 4082.64
Youth Calcium Rich Formula
400g/bag 01-28-2008 3200
Youth Calcium Rich Formula
400g/bag 04-05-2008 1783.29
Formula with Rich Iron and Zinc
400g/bag 06-12-2008 1201.56
Students Nutritional Formula
400g/bag 01-23-2008 968
Lady Calcium Rich Formula
400g/bag
05-11-2008
561.0
Pregnant Women Nutritional Formula
400g/bag 06-29-2008 287.75
Family Nutritional Formula
900g/can 09-02-2008 1.3
Full-cream Milk powder
25kg/bag 06-21-2008 2225.62
Full-cream Evaporated Milk Powder
25kg/bag 04-25-2008 145.82
Shijiazhuang Baocheng
Full-cream Milk Powder
25kg/bag Baocheng 06-16-2008 5577.29
Tangshan Longyuan
Full-cream Milk Powder
25kg/bag Longyuan 06-03-2008 5539.76
Nan Shan
Middle and Old Aged Milk with Higher Fiber and Rich Calcium
400g/bag
09-08-2008 5624
Middle and Old Aged Milk with Higher Fiber and Rich Calcium
900g/can 09-11-2008 3700
Middle and Old Aged Milk with Higher Fiber and Rich Calcium
400g/bag 06-23-2008 2200
Tangshan Longgang
Full-cream Milk Powder
25kg/bag Longgang 09-11-2008 710.17
Tangshan Mingle
Full-cream Milk Powder
25kg/bag Mingle 08-11-2008 354.60
Zhangbei Hongguan
Full-cream Milk Powder
25kg/bag Hongguan 08-01-2008 353.03
Chabei Milk Evaporated Milk Powder
300g/bag Chabei 09-11-2008 326.75
From official information available as of Tuesday 30th September http://www.aqsiq.gov.cn/zjxw/zjxw/zjftpxw/200809/t20080930_91891.htm
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Limited
Henan Jinyuan Full-cream Milk Powder
25kg/bag Jinyuan 18-03-2008 287
Brand Product Name Packaging Distinguishing Logo / Sample
Product Image
Production Date of Test
Sample
Melamine
(mg/kg)
Guangming
Aromatic Full-cream Milk Powder
400g/bag
07-09-2008 140
Guangdong Yashili
Special Formula for Primary and Middle School Student
400g/bag
07-15-2008 94.6
Special Formula for Ladies
400g/bag 06-03-2008 19.2
Youyi Special Formula for Ladies
400g/bag 07-09-2008 3.05
Tianjin Haihe
Full-cream Sweet Milk Powder
400g/bag
Haihe
08-17-2008 56.38
Fujian Fule Food
Rich Calcium Milk Powder for Middle and Old Aged
400g/bag Guige 06-04-2008 32
Yili
Fortified Vitamins & Hi-Calcium Milk Powder for Aged
400g/bag
05-05-2008
25.7
Fuzhou Mingyi Students Milk Powder
400g/bag Mingyi
08-03-2008 17
Sanyuan
Dry Milk
08-07-2008 10.58
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Mengniu
Fortified Vitamins & Hi-Calcium and Hi-Iron Milk Powder for Ladies
400g/bag
08-21-2008 6.0
Notes: – The information in the tables ‘Baby Milk Formula with Melamine’ and ‘Milk and Yogurt with
Melamine’ based on Chinese government sources published as of Wednesday 8th October 2008.
– This is a developing story and it is possible that additional brands and / or products may be later found to have contained Melamine
– The images under 'Distinguishing Logo / Sample Product Image' are not necessarily those of specific products that were found to contain Melamine. Since we were not necessarily able to obtain images of the tainted products, we decided to use representative images of products made by the brand in order to visually communicate the characteristic brand logo. Please refer to the "Product Name" and "Packaging" columns for product-specific information.
– Emerging Strategy takes no responsibility for the accuracy of this information. The information has been translated from Chinese, and it is possible that there may be some inaccuracies in the original Chinese or in the translation. This information is communicated for public interest / reference only.
– The information in the tables ‘Baby Milk Formula with Melamine’ and ‘Milk and Yogurt with Melamine’ may be distributed without Emerging Strategy's permission. However, we request that if you publish this information, please credit Emerging Strategy as the source.