Home-made formula sells with foreign ID

With the credibility of Chinese dairy products in crisis following a series of safety scandals, many Chinese parents have placed their hopes on foreign infant formula brands, but only to find that some of these brands are not so "foreign" after all.

As the market for foreign infant formula expands, shrewd Chinese dairy producers have gone all the way as to register their companies abroad and then sell their products in China as foreign brands.

Experts warn that foreign made infant formulas are not necessarily 100 percent safe, and that Chinese parents should keep a cool head when they pick products for their kids.

Loss of credibility

Earlier this month, an unidentified customer wanted to buy Nouriz infant formula online as he had learned it was imported from New Zealand. His friend in New Zealand revealed to him however, that the brand couldn't be found in local markets and locals had never heard of it, the Beijing News reported.

Shanghai Nouriz Dairy Company released an announcement on its website on Wednesday claiming it had registered Nouriz brand in both New Zealand and China to ensure that its production met standards in each country.

The raw materials used in Nouriz infant formula are produced in New Zealand and the entire production process is completed there, the announcement said. It also noted that the Shanghai Nouriz Dairy Company is only responsible for Nouriz product marketing and post-sale service in China.

The reason why the brand is not found in News Zealand is that the company targets only the Chinese market, Yan Zhiyong, a spokesman for the company was quoted by the Beijing News as saying. Nouriz is not the only "foreign" brand "tailored" for the Chinese market.

Scient, a Guangzhou-based infant nutrition company, once claimed it was a US brand and said all its milk was imported. However, the US Food and Drug Administration document issued in July 2009 showed that "Scient" was not in its food company database, and that Scient's registered address in the US was just a house without any production facilities, the Beijing Daily reported.

Under pressure from the public, Zhang Litian, board chairman of Scient, finally admitted that "the Scient company and brand is solely Chinese owned and operated."

A series of dairy scandals in China in recent years has led to the decreasing of trust in domestic dairy brands, which has resulted in the increasing popularity of domestic "foreign" brands.

The General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) issued a notice in September 2008 that Melamine, a chemical substance added to enhance formula's protein levels, but which in large doses causes infant urinary system diseases, was found in 69 batches of infant formula originating from 22 factories country wide. This included dairy giants Sanlu Group, Inner Mongolia Mengniu Dairy Group and Inner Mongolia Yili Industrial Group.

In the latest case, the amount of Aflatoxin M1, a strong carcinogen, was found exceeding 140 percent of the legal level in liquid dairy products produced by an Inner Mongolia Mengniu Dairy Group affiliate in Meishan, Sichuan Province in December 2011, according to a notice released by GAQSIQ recently.

"The string of incidents related to domestic dairy products has made me totally lose trust in them," Yang Juan, a mother of a 3-year-old boy in Beijing, told the Global Times. "You don't know which domestic brand will have problems next time."

Since her son was born, Yang has bought him Friso, an infant formula produced in the Netherlands, on the Internet as online prices are much cheaper than that of supermarkets.

"All the young mothers in my community buy exported infant formula for their children," Yang said.

Hui Zhenfeng, a 26-year-old father and coal mine employee in Shenmu county, Shaanxi Province, flies to the provincial capital every two months to buy Mead Johnson, an infant formula produced in the US.

"I'm worried I'll accidentally buy fake foreign infant formula in such a small town," Hui told the Global Times.

Commercial opportunities for foreign brands

The decrease in trust of domestic products has created more commercial opportunities for foreign infant formula brands in China.

Before 2008, the market share of foreign and domestic infant formula brands in China was 30 percent and 70 percent respectively. After the Melamine accident, foreign brands' market share has increased dramatically, Wang Dingmian, president of the Guangzhou Dairy Association, told the Global Times.

The latest statistics show that the current market share for foreign infant formula brands is about 60 percent. In the high-end market, it accounts for more than 90 percent, Shanghai Evening Post reported on Thursday.

The Global Times has found that foreign infant formula brands are sold for between 200 yuan ($31.7) and 400 yuan a can in China, two or three times more than domestic ones.

The gross profit rate for foreign infant formula is 80-100 percent, while that of the domestic one is only about 40 recent, China Economic Net reported Friday.

"The price of foreign infant formula in China is comparatively higher than in other countries. Foreign brands make large profits by targeting higher-class groups in China," Wang said. "Their price is not influenced by production cost or tariffs."

"Many consumers blindly worship foreign infant formula," Cao Mingshi, vice general secretary of Shanhai Dairy Association, told the Global Times.

As food security problems are a global issue, including dairy safety, many things affect their quality, such as production, transportation, distribution and stock chains, Cao said, adding that "not all foreign infant formula is good, and not all domestic is bad."

The US-based Abbott Laboratories Inc said in September 2010 it was voluntarily recalling millions of containers of its top-selling Similac powdered infant formula, after beetles were found in the product and in a Michigan plant where it was made, Reuters reported.

To win the trust of consumers, dairy producers should conduct strict quality control over, and invite a third party to supervise the entire production and distribution process so as to allow for the full transparency of information to the public, Wang said to the Global Times.