Formed in 2001 to represent most New Zealand dairy farmers, Fonterra is the world’s biggest dairy exporter. It suffered a setback in China in 2008 after an adulterated milk powder scandal affecting Sanlu, 43-per-cent-owned by Fonterra. The milk powder was adulterated with melamine, affecting thousands of Chinese infants and killing six. Sanlu was declared bankrupt and several managers were sentenced to prison. In 2013, Fonterra also sought to reassure the market after Dicyandiamide, also known as DCD, was found in exported New Zealand milk. DCD is used to stop nitrogen leaching on farms. In August 2013, some of its products were withdrawn in selected Asian countries including China after it said it had found bacteria which can cause botulism in some of its dairy products.
Chinese state media use foreign dairy scandal to defend local brands
Press have field day reminding consumers that botulism is far more dangerous than melamine
State media have leapt at the chance to restore mainlanders' confidence in domestic makers of baby milk formula by highly publicising a food-safety scare involving New Zealand dairy giant Fonterra.
China has also ordered US pharmaceutical company Abbott, manufacturer of Similac Gain milk formula, to recall two batches of the product that were packed on a Fonterra production line that had not be sanitised after processing ingredients contaminated with botulism bacteria.
None of Abbott's products sold on the mainland contained the tainted whey protein in question, the company said in a statement on Monday night.
Fonterra announced over the weekend that 38 tonnes of its whey protein concentrate was found contaminated with the bacteria, which can affect muscles and in serious cases may cause respiratory failure. The finding also prompted Danone to recall 12 batches of Dumex baby formula on Sunday.
The food-safety scandal came amid Chinese authorities' determination to reclaim market share lost to foreign makers of baby formula, stemming from a melamine-tainted milk scandal in 2008 that killed six children and made ill more than 300,000 others.
Confidence among mainland customers in domestic baby formula has since been shattered, and at least one analyst believes it won't be fully restored for at least five more years.
The Ministry of Industry and Information Technology in June issued an action plan to "boost the quality of dairy products and boost consumer's confidence". It ordered that a favourable environment be created for baby formula production by "rectifying and cleansing the sector", and via "positive propaganda".
The National Development and Reform Commission started an "anti-trust" probe into foreign baby formula brands in July, accusing them of inflating prices.
Fang Qiaojun, a dairy sector analyst at the Qianzhan Industry Research Institute, a Shenzhen-based think tank, said the keys to government efforts in rebuilding the sector were "powerful supervision of the industry and guiding public opinion".
But Fang said it was unlikely that mainland consumers would regain confidence in domestic dairy firms for at least five years, the time it would take to create a stronger dairy sector through advanced technology and management concepts.
Meanwhile, the Communist Party's People's Daily referred to mainland parents' trust in foreign brand baby formula as mere "superstition" and said consumers were "in urgent need of a change of heart".
It devoted almost a full page on Monday to product recalls and suggested that Clostridium botulinum was way more harmful than melamine, the substance that unscrupulous vendors used in 2008 to illegally boost the protein content of local milk.