Tuesday, October 14, 2008

News from milk industry

Some news from the milk industry in china.

News 1:

BEIJING -- Hangzhou Wahaha Group Co. is considering an acquisition of the dairy company at the center of China's milk scandal, company officials said Monday.

A spokesman for Wahaha, China's largest domestic beverage producer and a joint-venture partner of Groupe Danone SA, confirmed that chairman Zong Qinghou has said the company is interested in acquiring Shijiazhuang Sanlu Group Co.

The scandal over tainted milk, which has sickened tens of thousands of children, is expected to force a consolidation of China's fragmented dairy industry. Scores of dairy producers with complicated supply chains around the country made the industry difficult to monitor ...

My take:

After every major crisis, there are also opportunities abound. Those who survive this saga will emerge much stronger, for there are fewer competitors around. With Wahaha considering an acquisition of troubled Sanlu group, I expect to see perhaps more consolidation of the China's milk industry

News 2:

Three Chinese dairy companies have publicly apologized for their involvement in a toxic milk scandal that has killed at least four children and led to Chinese-made products pulled from shelves around the world. All three brands have lost there status as ‘China National Brands’. This won’t bring back the prestigious label but is seen as a first step to regain consumer trust….

Inner Mongolia Yili Industrial Group, Mengniu Dairy and Bright Dairy Group were found earlier to have produced milk contaminated with melamine, a compound used to cheat nutrition tests.

The scandal has savaged the companies’ share prices and prompted Seattle-based coffee chain Starbucks Corp to pull Mengniu milk from its 300-plus stores last month.

“I feel I have let everybody down. I have done so much, yet still done wrong,” Beijing News quoted Mengniu’s marketing chief, Zhao Yuanhua, as saying on state television.

Zhao and executives from Mengniu and Bright Dairy also promised consumers that their products prices would not rise despite higher costs of quality controls.

Chinese health officials last week said that nearly 10,700 infants and children were still in hospital after drinking toxic milk and formula. More than 36,000 children had left hospital after being treated.

The scandal has rocked faith in the safety of Chinese-made products, already under a cloud from a series of quality scandals involving food, drugs and toys last year, and prompted authorities to issue tighter rules governing milk production.

China’s quality watchdog said a fourth round of tests on baby milk formula and other milk powder from dozens of local brands across 18 provinces had shown no new cases of melamine contamination, Xinhua news agency said in a separate report.

But the Ministry of Agriculture had decided to continue sending quality teams across the country to monitor the clean-up of milk stations and animal feed producers, it said in a notice on its website.

“Supervise and urge local authorities to investigate and punish the illegal use of melamine and other toxins, and other unlawful adulteration,” the ministry said.

My take:

With the three giants in the milk industry stripped off their China National Brands name, I wonder what's in store for these three. How long does it take for them to regain the trust of consumers? Or are consumers forgetful? They did mention that they will keep the prices steady even as their costs increases from the higher quality control. If raw milk prices rises, these companies are going to suffer two fold - first is the lack of demand for their products, second is the squeeze they will feel when the cost rises yet unable to pass the cost to consumers. It'll be interesting to see how they cope with their business henceforth.

Who ask them to do funny things to their products?