Contaminant scare hits liquor market

PUBLISHED : Thursday, 25 September, 2008, 12:00am
UPDATED : Thursday, 25 September, 2008, 12:00am

Stock prices of alcohol producers tumble as internet rumours swirl about tainted spirits

Several listed spirits makers were forced to defend their brands yesterday as rumours that carcinogenic contaminants were found in their products had spread among panicky mainland consumers following the tainted-milk scandal.

Hong Kong-listed Tsingtao Beer and mainland-listed Kweichow Moutai and Yantai Changyu Pioneer Wine had to issue public statements.

Rumours began flying on the mainland that the companies made products containing sodium nitrate - a chemical that can cause cancer if consumed in excessive amounts.

One rumour circulating on Tuesday claimed that the General Administration of Quality Supervision, Inspection and Quarantine had detected sodium nitrate in samples of products of Moutai, Changyu, Tsingtao and a number of other companies that make alcoholic beverages during a nationwide inspection.

The rumours sent the stock prices of almost all listed alcohol firms tumbling on Tuesday, and many fell by the maximum daily limit of 10 per cent.

The three firms all denied the allegations on Tuesday night. The China Alcoholic Drinks Industry Association, a loose industrial grouping of major alcohol firms, said yesterday that state quality inspectors had not visited any of the companies as of Tuesday.

Shanghai-listed Moutai's stock price recovered to 126.48 yuan (HK$144.51), a gain of 5.13 per cent, at the close of yesterday's trading, and Shenzhen-listed Changyu gained 0.55 per cent to stand at 49.50 yuan.

In Hong Kong, Tsingtao Beer closed at HK$14, losing 10 cents, or 0.71 per cent.

But consumer distrust over food safety was far from resolved, especially given the lack of transparency and efficiency in China's quality inspection system, Beijing University of Posts and Telecommunications professor Liu Deliang said.

'We should ask why people prefer to trust internet rumours rather than company and government sources,' Professor Liu said.

'First of all, companies and the government do not have great credibility in the immediate aftermath of the milk scandals. Secondly, government information has been too slow to meet people's needs.'

Melamine was found in many of the country's infant formula products this month. State inspectors later found the same industrial additive in other dairy products, such as liquid milk and ice cream. The slow response to the crisis by milk firms and state inspectors resulted in a strong sense of distrust among consumers.

Professor Liu said such distrust had stoked the rumours of alcohol contamination, even though the claims did not appear in official media. 'Are all spirits makers clean? Absolutely not, just like many other sectors in the food industry,' he said. 'Until we have a transparent and effective food inspection system in place, such rumours will be picked up by consumers again and again.'

China's wine and spirits industry has long been plagued by fake and low-quality products. Even Moutai, the dominant brand, has admitted there is much more of the product on the market than it produces. A low-end Moutai line, Moutai Yingbin, failed to meet national quality standards in Shenzhen this month.

Other quality problems in meat, eggs, seasoning and even vegetables have been common on the mainland, forcing government inspectors to maintain checks year-round.