“Are you still prostrating yourself before foreign milk powder?”

The vast majority of Chinese daily newspapers yesterday featured the massive New Zealand milk powder product recall as a front page story, most as either the leading headline or as a large and prominent graphic feature. The imagery is very much that of a scare campaign, with dozens of papers using evocative images of microscopic bacteria. The cover of the Xiamen-based West Strait Morning Post even showed the grim reaper lurking behind the recalled products. The New Zealand flag was also prominent on some front pages.

Yesterday the New Zealand dairy giant Fonterra announced that a batch of whey protein concentrate manufactured in New Zealand and sold to dairy producers in China (and many other countries) was contaminated with bacteria that can potentially cause fatal botulism. China responded by halting all milk powder imports from New Zealand and Australia, and ordered product recalls of infant milk formula and milk drinks sold by the affected companies, which include Dumex, Wahaha and Coca Cola. But hundreds of tons of affected milk powder have already been sold.

This is a major issue in China because milk powder is the preferred source of nutrition by Chinese mothers for their children, and domestic milk powder safety scandals have triggered massive demand for foreign milk products because they are perceived as safer. Additionally, New Zealand is the source of over 80% of imported milk powder in China, and 95% of the New Zealand dairy industry is export-oriented.

It is unclear what the long-term effect of this ban will be on the Chinese milk powder and dairy markets, but given how extensive and sensationalist the coverage of ‘contaminated New Zealand milk’ has been in the Chinese press over the last couple of days, it may present an opportunity for the domestic dairy industry to regain market share forfeited as a result of their own safety scandals over the last few years, particularly if the Chinese government takes its time lifting the ban on New Zealand imports.

A handful of newspapers preempted the consumer reaction and carried headlines provocatively suggesting that this mass product recall has significantly damaged the reputation of foreign milk powder and that its substantial market advantage over domestic brands may be drawing to a close.

The front page of the Guangzhou Daily also wonders, “Could the worship of foreign milk powder be coming to an end?” The story on page three states that, based on its interviews with city residents, the “myth of foreign milk powder is collapsing” as Chinese parents have lost confidence in its safety and in the future may no longer differentiate between the quality of domestic and imported milk powder. The report continues by stating that cases of unsafe foreign milk powder are becoming increasingly common, with over 8,400 tons of milk powder from countries like New Zealand, Australia, Chile and South Korea failing to meet import quality testing standards so far this year.

The front page of the Chengdu Evening News asks, “Are you still prostrating yourself before foreign milk powder?” A feature report on the incident spread out over pages five and six quotes Shanghai University professor Gu Junren as saying that foreign milk powder has fallen off its “divine altar” and so domestic dairy product enterprises should not celebrate but use this as a time for self-improvement in order to increase the strength of their products as substitutes for imported milk powder.

cover story in the Shanghai Securities News also warned, “The Chinese dairy industry should not look upon another’s trouble with indifference”, suggesting that Chinese milk product companies should not take idle delight in Fonterra’s misfortune but must remain vigilant themselves to avoid the safety issues that have plagued them in the past.

It remains to be seen how this latest milk powder safety scandal pans out with Chinese consumer preferences, but there is no doubt that the Chinese media will try to play a role in forming popular perceptions and purchasing behavior.

Links and sources:
Guangzhou Daily (广州日报): 进口洋奶粉七成恒天然
Chengdu Evening News (成都晚报): 多美滋问题奶粉流入市场420吨
Shanghai Securities News (上海证券报): 新西兰乳品染“肉毒杆菌”;国产奶业不应隔岸观火

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