When Consumers Lose Confidence. Beijing Acts

Wednesday, March 13, 2013 4:56

While the news of 6,000 pigs floating in Shanghai’s water ways is front and center this week, the issue of consumer confidence has been a growing for some time.  Particularly since the 2008 milk scandal.

It is an issue that has become an economic one as Chinese residents, whose spending habits have grown in the last few years, look to identify and acquire safe products in mass. which, in the case of milk powder, has resulted in one of the largest diverted product supply chains known to man.  To the point where relations between the mainland and HK have grown strained, and a new law has gone into place that prevents the exportation of more than 2 tins of milk powder from HK.

Seriously, it has come to this.  (Pictures of announcement above).

Which is something that for me underlies the real risks of the “Aporkalypse” (Thanks Andrew).  The economic impact of consumers who are going to (once again) lose confidence in domestic products.  As well as foreign products produced in China.  Psychologically this has the potential to reverberate through the wider economy as consumers look to find safe sources of yet another product.  A product that is the primary meat of choice for Chinese, and is a huge economy in and of itself.

What will Beijing “do” about it. That remains to be seen.

Some have said that promoting FDA to a ministry, or super ministry, is the answer. I disagree based partly on what I have seen from the EPA, which reached ministry status 5 years ago, but also from the fact that food safety in China has nearly 20 agencies involved (only 5-6 are really needed) with several being the super DUPER ministries.  for example, NDRC, MOFCOM, and PSB.

For me, this will come to recalibration of a model that is defragmented, decentralized, and poorly enforced.  It will require moving away from small farms, while managing the needs of small farmers, so that consistency in process, quality control, and testing can occur.  At scale.

Most importantly though.  It will require transparency.  Internally, it needs to be a system that identifies and mitigates a problem before it floats down the river, explodes in teh fields, or sends 300,000 kids to the hospital.  Externally, it needs to be a system that instills confidence in China’s consumers.

For me, to truly fix this problem at the systemic level it is going to take a recalibration of the food economy..

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