China’s Milk Test Melamine Free, But Will Anyone Buy It?

Wednesday, October 8, 2008 1:50
Posted in category The Big Picture

Yesterday afternoon I was talking to another member of the Shanghai community while hanging around the pool and we were discussing the issue of how this recent scandal will impact the public’s faith in the food systems.

It’s clear that the milk firms have a long way to go to rebuild confidence with consumers, and the conversation seemed to reinforce the point that a 3rd party who is credible with consumers, trusted by the government, and completely impartial (all necessary for sustainability) is needed (a point I wrote about in my post What China Needs is a Ralph Nader)

so, when reading the article China quality watchdog: New liquid milk supplies melamine free, I can;t help but ask whether anyone will buy the milk.  I am not trying to call anyone out for lying, but a few points to put forward as to why I think there is going to be resistance domestically and internationally.

1) Face – a core reason why this took so long to address was because the milk industry, and provincial officials, did not want to make China look bad prior to or during the Olympics.  In their mind, China’s international image was more important than the lives of China’s children

2) Corruption – there are now reports that up to 30 officials have been sacked/ arrested over this.  you already have had the top person at the Quality watchdog resigned over the scandal, and as such you can clearly see that the gov’t was in on the problem for a long time. So, now you have a problem as the government will be looking to look good in cleaning up the problem.

3) Testing – The testing was done by the same government body whose head took full responsibility of the problem – i.e. there has been no third party verification of the safety of the milk, nor does this testing indicate anything about future testing.

Facing all the above, I have no doubts that China is serious about cleaning up its industry, and that in time (not 2 weeks) it will, but the question remains… will Chinese mothers trust the milk?

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8 Responses to “China’s Milk Test Melamine Free, But Will Anyone Buy It?”

  1. Duncan says:

    October 8th, 2008 at 7:29 pm

    Deeply cynical for the central government to tell local officials that they’ll sack them if they don’t suppress bad news during the Olympics, and then to sack/prosecute them when they do.

    Anyone who buys this line of “good central government officials and poor quality local officials” needs to reassess.

  2. BW says:

    October 8th, 2008 at 8:43 pm

    I thought the main reason of sacking them was because they didn’t report the problem to the central government in time, not because of suppressing news. I think I read somewhere that the report was delayed both at the city level and at the provincial level. There was definitely pressure to suppress bad news during Olympics, but submitting reports to the central authority doesn’t involve gathering publicity.

  3. Rich says:

    October 8th, 2008 at 9:11 pm

    Duncan,

    I am not surprised by this. By the accounts I have read is that this is at the provincial matter and is occurring because the officials are trying to save their face. My interest now is to see how the national level deals with that, as that to me is the more important sign of whether there has been progress.

    R

  4. Rich says:

    October 8th, 2008 at 9:16 pm

    BW

    You are correct in that they suppressed the information from going to the national level in a timely fashion (i.e. they sat on the reports).

    What Duncan is speaking about is the recent news that lawyers working on the case in Shanxi have been told by members of the Shanxi government not to participate in the lawsuits being filed.

    two different issues, but if the central party moves to correct the recent pressure on lawyers I would expect more officials will be sacked. A move like that would show that the national government is really serious about addressing the issues related to covering things up in China, and it would be a boon for all lawyers in China who are looking to use the courts

    R

  5. Mike Underhill says:

    October 12th, 2008 at 9:56 pm

    Will anyone buy it? Yes, plenty of people will (we just did a study on this). Apart from San Lu, which is damaged beyond repair, prospects look OK for major brands – less than a quater of their loyalists say they won’t go back to them. The vast majority will forgive, if not forget.
    That disgruntled minority will then either give up milk, choose a foreign brand or choose among other local brands which have likewise been implicated. Milk alernatives are, for whatever reason (price… taste… availability…), unattractive which is why these people were using milk in the first place, so there is probably not going to be a huge migration to soy. Trust of foreign brands has also been hit, I should add, so we don’t see them benefitting from this. Which leaves the other local brands, and for them there is actually a potential plus from all this: brand loyalty is much better.
    Instead of regularly buying more than two brands, consumers say they’re now going to stick with one. Which means they’re more selective, less price sensitive. Which is good, partly because getting milk to market will cost more for all companies that obey the rules (everyone’s skepticism about compliance duly noted), but is also good because it’ll reduce the marketers’ dependence on price as the primary tool for generating sales.

  6. Shaolin babe says:

    October 14th, 2008 at 9:04 pm

    I am writing from a small town called Weifang. Just want to inform you peeps that here nothing changed. The milk was never removed from shelves and even Walmart continued selling the contaminated milk. Sanlu still have adverts in public places and even on buses. So I pretty much think that what happened in big cities was more PR than anything.

    I monitored the situation closely and even talked to some Walmart and other big supermarket employees and what they said was they had not been informed to remove the milk.

    Hope this sheds some light…

  7. Rich says:

    October 15th, 2008 at 5:43 am

    Mike

    Thanks for providing your insights. I was in the market the other night, and there were a lot of people picking up their dairy for the week – so, I think the process is already beginning.

    Any indication as to HOW they are chosing their brands, and did you draw any conclusions as to what resources/ measurements they are using to decide which brands are safest?

    R

  8. Rich says:

    October 15th, 2008 at 5:46 am

    Shaolin Babe.

    Interesting observations. Was there any media coverage (news, papers, etc) of what happened there? I find it interesting that Wal-Mart did not pull the product from their shelves… I’ll see if I can track someone down to see what they say about that.

    R