China milk powder story – now foreigners are to blame

“Chinese people are buying infant milk powder formula abroad!” “British retailers had limited the purchases of milk powder to two tins per customer!” – these kinds of news appeared quite often, and many Western businessmen started to think, “Well, maybe selling milk powder to China would be a great idea.” Certainly, China may be seen as a big market to conquer, and entering it with a dairy product is not that easy. We will explore this topic closely and analyze the chances of such a venture.

China milk powder story

Why are the Chinese so obsessed with foreign-produced dairy products?

It all started in 2008, the year of the Olympic Games in Beijing. Doctors in China were very surprised by the number of children suffering from kidney stones. Somehow they realized that all the children were eating milk powder manufactured by one company – Hebei-based giant corporation Sanlu.

Despite the government’s reluctance, every detail of the case was soon revealed, and public outrage swept China. It turned out that the middlemen added water to milk to increase the output. To hide it, they used melamine, a popular substance used in plastic production, which increased the milk protein count. Bribed officials and company representatives were not eager to perform quality checks. Melamine caused kidney stones and kidney failure. As a result, six children died, thousands were sick, and two of the managers involved in the case were executed. But a breach of trust of that size cannot be forgiven easily.

Many Chinese parents switched to foreign-manufactured milk powder. Then, another scandal followed. Yili Corporation from Northern China, an independent quality check agency, found elevated levels of mercury in their milk.

No wonder that almost every time Chinese people are abroad, they buy large quantities of foreign-manufactured milk powder and other dairy products for themselves, their families, and friends.

Milk from New Zealand

In August 2013, an unexpected turn of events occurred. New Zealand’s company Fonterra, one of the biggest importers of dairy products to China, had discovered dangerous bacteria in 38 tons of whey protein used in soft drinks and baby formula. According to the Chinese authorities, 420 tons of baby milk powder were contaminated and promptly withdrawn from the market. China has imposed an import ban on New Zealand’s (and Australian) dairy products, and the market share of Chinese and Japanese producers had risen instantly.

Chinese authorities should be somehow satisfied: the Fonterra scandal provided the pretext for more scrutiny in control of imported dairy products (import can be limited – more money stays within the country), and, as the dozens of pro-governmental “50 Cent Party” internet commentators have told us, “Foreigners also have unclean hands, so everyone has unclean hands, this is how the things are, no need to panic, buy Chinese!”

The bottom line

So, if we consider selling dairy products to China, we must realize that it certainly won’t be an easy deal. Infant formula milk powder is classified as a special dietary food in China. On 1 October 2016, the Administrative Measures on Product Formula Registration of Infant Formula Milk Powder came into force. State Administration for Market Regulation (SAMR) has to approve manufacturers willing to sell infant formula milk powder products in China. Moreover, all overseas food manufacturers shall register the factory at GACC before entering China market. Overseas manufacturers of imported food additives and food-related products are not required to register the factories.

If you export to China, make sure to register your trademark.