getting it

January 30th, 2013

Ah, good, evidence, finally, that people in New Zealand are getting it. In today’s NZ Herald are this piece by Christopher Adams entitled Swift Backlash over Dairy DCD and this piece by Fran O’Sullivan pointing out the glaring lack of a battle plan for handling the risk to New Zealand’s dairy exports. And it’s about time somebody pointed out the enormity of the situation, because the headline of this article is by no means the most extreme I’ve seen over the last few days:

后新西兰时代”的奶粉消费风向

Milk powder consumption trends of the “Post-New Zealand age”

Notice the “finance.qq.com” part of the address? QQ is far from a minor player in the Chinese internet. If it’s on qq, a hell of a lot of people are going to be reading it.

The word I translated as “trends” also means “wind direction”. You know what Bob Dylan sang about not needing a weatherman to figure that out. Apparently the MPI and Fonterra do need help from the met service.

From Adams’ article:

Biopure Health had seen its turnover doubling every week since the firm opened its network of New Zealand Milk Bar retail stores in China’s Sichuan province last year, Page said.

But he said sales promptly went “to zero” when customers found out about the presence of small amounts in DCD in New Zealand dairy products after the publication of a Wall Street Journal article that questioned the safety of this country’s milk.

Customers had even been returning formula to stores and asking for refunds, Page said.

Well, yes, Chinese parents do tend to be hypersensitive about the safety of their children, and not just because they’re generally allowed only one. As O’Sullivan writes:

The problem with this developing fiasco is that the major players have been addressing the issue from their narrow perspectives rather than that of Chinese consumers who have been the major driver of the New Zealand dairy industry’s rapidly increasing milk powder sales post the 2008 Sanlu melamine disaster, to the point where it provides 80 per cent of China’s foreign dairy imports.

Yes, exactly. Nobody has forgotten the melamine scandal, and as I discovered the other day, some are quite actively remembering Fonterra’s involvement in that. And it’s not just melamine, that was only the biggest of several scandals involving infant formula, and it emerged that some of the melamine milk had been hidden away, only to be put back on the market a year or so later when the dust had settled. Add to that the near constant food safety scandals, from illegal, toxic additives to last year’s unsold mooncakes on sale again this year, and I think you can imagine how stressful being a  parent in China can get. Chinese parents turned to Western brands of infant formula because they perceive Western companies as safer and less likely to cut corners or play fast and loose with safety and quality standards, and the turned particularly to New Zealand formula partly because many big European and American brands source their milk from New Zealand, but also because they’ve bought into the perception of New Zealand as being clean, green and pollution-free – a perception strongly encouraged in the dairy industry’s marketing here in China.

When you’re living in a heavily polluted city surrounded by constant food safety scandals and never quite knowing whether what you’re buying is genuine or fake, just knowing there’s an awful lot of fake stuff out there (including food, drink and medicine), the concept of a place with no pollution, pure and natural, whose food products are guaranteed to be free of any contamination, is powerfully attractive, to say the least. I’m looking out my window at smog so severe the media is openly discussing just how bad things have got and what needs to be done to fix the situation, then looking at photos of a New Zealand summer, and I know where I’d rather be raising my wee one. It’s simply not right to have to look a healthy, active toddler inside for fear of what the air outside will do to her lungs. Similarly, Chinese parents lost all faith in China’s dairy companies after the melamine scandal. They perhaps rather naively bought into New Zealand’s clean, green reputation. Now it turns out that Fonterra knew back in September of the DCD contamination, but said nothing – learnt a bit too much PR management from its Chinese partners, perhaps? But the country they trusted to supply pure, uncotaminated formula for their children now turns out to have contaminated milk, too? And they knew in September? And we, the consumers and parents, don’t find out until now? And MPI’s and Fonterra’s answers to our questions just somehow don’t seem entirely trustworthy… That’s one hell of a kick in the guts.

O’Sullivan again:

There was always going to be a major perception gap but there are no obvious signs that the industry and authorities had formed a battle plan to counter the trade risk.

and:

Trouble is by the time Worker – together with Fonterra China boss Kelvin Wickham – fronted the Chinese media he was already fighting a perception issue.

The vice-minister of China’s General Administration of Quality Supervision, Inspection and Quarantine, Wei Chuanzhong, had issued a “Please Explain” earlier that day asking for a “detailed risk assessment report” on New Zealand dairy products after the “potentially harmful” chemical residue was found in them.

AQSIQ was not satisfied with the New Zealand Ministry of Primary Industries’ rather cursory press statements.

They wanted to know exactly where the contamination occurred: which products, which batches and which companies were involved.

And again, exactly. We don’t have any information, really, we only know that some milk powder was contaminated. It’s one thing telling me that only a few products were affected and that the contamination levels were less than 1% of the EU standard – but hang on, the first reports I saw said there was no standard for DCD contamination, and you either can’t or won’t tell me which products were affected and what you did with them, and you apparently don’t have even the common courtesy to inform AQSIQ, who, if properly informed, would be able to confirm to the Chinese media that what MPI and Fonterra said was true (assuming it is true). So long as MPI and Fonterra behave this way and until we, parents trying to raise kids in China, have solid information confirmed by a third party (i.e. AQSIQ) to process, how the hell are we supposed to trust MPI and Fonterra?

Now, back to that qq article with a headline that should have Fonterra and the New Zealand government squirming. Here’s how it opens:

几年前的国内品牌“三聚氰胺”事件,让洋奶粉一度成为品质的象征。不过,上周新西兰恒天然产品被曝出含有微量二聚氰胺,国内消费者一时陷入了选择的困境中。在不少消费者还在持观望态度时,网络代购已经出现缩水迹象,同时,荷兰、英国等欧洲产地的奶粉迅速成为新宠。

The domestic brands melamine incident of several years ago instantly made Western milk powder the symbol of quality. But with last week’s revelation that New Zealand Fonterra’s products contained tiny amounts of DCD, Chinese consumers have fallen into a dillema of choice. As many consumers maintain an attitude of “wait and see”, signs of a shrinking of internet buying agents have appeared, and at the same time, milk powder from the Netherlands, the UK and other European producers have rapidly become the new favourites.

So, if we can’t trust those Kiwis, we’ll turn to Europe? I hope Fonterra’s paying attention.

In the next paragraph the reporter writes of shoppers in large supermarkets like Carrefour’s Fangyuan store and Walmart’s Xuanwumen store still largely buying by habit, but many more looking closely at the labels. And if you look closely, an awful lot of the imported infant formula is made in New Zealand. There’s not a lot of options for parents looking to avoid potentially contaminated New Zealand milk. And there’s these suspicious labels claiming their formula is imported, but not naming a country of origin, so the reporter asked a store assistant, who said that the main source countries of imported formula were New Zealand, Singapore and Ireland, among others.

Singapore? Really? Anyway, moving on…

The next two paragraphs present an interesting contrast. First, there is a shopper who had been feeding her baby formula from New Zealand. She’s worried and wants to swap to a non-New Zealand formula. The reporter says:

消费者的担心并不是多余的。

The consumers worries are not uncalled for.

Why? Because 80% of dairy products imported into China come from New Zealand.

And on the other hand are the store assistants, some of whom said they hadn’t heard of the DCD problem, others of whom said the authorities had issued an official notice that New Zealand dairy products were safe.

And then there are some interesting stats about the online trade in New Zealand-made infant formula. In the last 7 days, sales of imported New Zealand milk powder have dropped 50%, and are 50% lower than at the same time last year. On January 26, the sales figure for New Zealand milk powder purchase agents was “2”, on January 27 it was “0”. Many sellers have posted MPI’s notice assuring consumers that New Zealand dairy products are safe on their front pages.

That’s followed with the rather curious statement that the DCD contaminated milk discovered in September has been sold out, so everything on the market now is safe. Well, great, but how’s about MPI or Fonterra tell us which products and which batches were contaminated, just in case somebody’s got contaminated formula stored up somewhere?

So how does this article actually get to the trends of the “post-New Zealand age”? Well, apparently a large chain of German supermarkets are limiting customers to four cans of infant formula per purchase, and Dutch supermarkets are limiting customers to one can per purchase, while online sellers are struggling to fill orders for European infant formula thanks to the combination of high demand and restricted supply. And, of course, prices for European formula are going the way prices naturally go in times of high demand and tight supply.

And all of this has me wondering: Have MPI and Fonterra just gone and blown New Zealand’s ability to cash in on the China market? Or will they manage to somehow get their act together and repair the damage they’ve done? I guess they can consider themselves lucky that the severe pollution across much of China this month is taking up so many column inches and pixels, because what I’m seeing strongly suggests this is not by any means a minor bump in the road which will be easily crossed. Nope, this is going to require lots of hard work on their part.

 

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