BEIJING — In recent years, we have seen numerous Chinese dairy firms sign cooperation deals with and make acquisitions of foreign dairy companies. Such a strategy has thus helped introduce advanced technology into the Chinese market, and offer the advantages of low-priced international milk resources that allows China to compete against foreign brands' milk-powder baby formula.
But what is clear to all is that domestic brands are trying desperately to regain the trust of Chinese consumers.
Ever since 2008 when China's domestic infant milk powder was found to be tainted with melamine, Chinese infant milk brands have been shrouded in the shadow of the tainted dairy products. Over the past few years, both the individual dairy enterprises and the government have made considerable effort by introducing a series of new policies and regulations to win back customers.
Government policies have indeed raised the quality of domestic milk production and improved the competitiveness of Chinese firms. According to the samplings of the Ministry of Agriculture, domestic producers have met basic government standards for the past five consecutive years.
Nevertheless, Chinese parents remain very wary of domestic baby milk products. In 2014, foreign brands still accounted for 70% of market share of baby formula in China. And for good reason.
A dairy farmer watches his cows in Jinzhong, in China's Shanxi province — Yan Yan/Xinhua/ZUMA
Why do the Chinese customers continue to put so much more faith in imported milk powder than domestic brands? We spoke with Qiu Zhaoxiang, the Greater China CEO of FrieslandCampina, a Dutch dairy cooperative. He explained that in the Netherlands, throughout the whole supply chain — from cows to customers — a strict quality-assurance system has long been in place. The dairy cooperatives, third-party checks, relevant authorities, universities and the dairy companies form a food safety ecosystem that is both transparent and traceable. Such standards apply to more or less the whole of Europe.
Meanwhile in China, in both the farming and the processing procedures, chaos and confusion are still far too common. The government has sought to promote large-scale farming through consolidation, and yet it has not been accompanied by the necessary environmental standards and health measures. Moreover, in order to survive, many small dairy firms sell their produce to bigger enterprises so as to circumvent new governmental regulations. Meanwhile, the government fails in its role as gatekeeper and guarantor by issuing far too many production permits for milk brands. This hodgepodge situation leaves Chinese consumers less than confident in the safety of local dairy.
In considering the past "criminal record" of some of China's dairy firms, what can the industry do to regain Chinese customers' faith? Domestic milk brands must start by constructing an entirely open milk production chain, even more transparent and stringent than the ones that exist in the West. In October, the strictest ever food-safety law is coming into effect in China. Under the new law, infant milk formula will be vigorously controlled from the farm to the market shelf that will include risk-monitoring, assessment and prevention to minimize any chance for missteps.
Ideally, in the future when Chinese parents buy a can of powdered milk, they will be able to use their mobile phone to scan the bar code on it to trace back all the key information about the goods' farming, production, processing and circulation. Perhaps only then will Chinese consumers regain full confidence in the safety and quality of domestic baby milk.