Friday, March 29, 2024

Six of 13 plants approved by Chinese

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The New Zealand dairy industry has done well by getting Chinese approval for six of 13 infant formula manufacturing plants, but still faces uncertainty over which brands will make it through.
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China has introduced new regulations governing foreign companies that have been cashing in since Chinese mothers abandoned home-made product following the melamine scandal in 2008, which killed six babies and hospitalised 54,000.

China wants more traceable products, preferably with Chinese ownership or participation, including closer association between brand owners and their contracted manufacturers.

Companies in the NZ Infant Formula Exporters Association (NZIFEA) said the May 1 approval list was a good start to the new regime and was a better result than other countries had achieved, but considerable uncertainty remained.

The biggest unknown was whether all brands made in approved plants would gain access automatically to China or if there was a yet-undisclosed preferred brand list.

“This ‘closer association’ qualification is very nebulous and we are trying to get our government to pre-emptively set up a brand register,” one exporter said.

“China is not supposed to dictate down to brand level, although it is allowed to set manufacturing standards.

“We can see NZ losing control over time and the trade becoming dominated by Chinese-owned brands made under contract here.”

Only Denmark and France, the two largest suppliers of canned infant formula to China, fared as well as NZ in the number of plants approved by May 1.

Australia managed two out of 10 applications and the United Kingdom one.

The co-incidental announcement of French company Danone’s intention to buy Sutton Group and Gardians plants caught smaller exporters unaware, as did the initial failure of widely used Auckland-based contract packer New Image to gain approval for China.

Primary Industries Minister Nathan Guy and Food Safety Minister Nikki Kaye have admitted smaller brands without their own plants faced more complex requirements.

“In practice that means the brand owner having clear control over the manufacturing process and the product formulation for their brand,” they said.

“While the news is positive for manufacturers, for brand owners without a close relationship with the manufacturer the bar is going to be set high and some will struggle to meet the new rules.”

The ministers said 10% of brands might be “thinned out” but the NZIFEA thought perhaps 25% were under threat.

After the melamine scandal, which shattered the confidence of Chinese parents in all domestic milk powder and infant formula, NZ-origin products became sought-after and expensive.

Numerous exporters and Chinese agents raced to join the trade and the number of “NZ” brands proliferated.

The Chinese Government began to bring the sensitive consumer matter under control by selecting “national champions”, the largest domestic dairy companies, and regulating their formulas and brands.

It has extended that influence now over foreign sources with the plant registration requirement.

Danone subsidiary Nutricia has announced it intends to buy Suttons and its joint-venture milk powder plant in South Otago, Gardians, which is supplied by 18 dairy farms owned by Grant Paterson.

 “This transaction will provide Nutricia with a large milk-drying capacity, along with a long-term fresh milk supply access,” Nutricia said.

“It will also add an infant formula blending and packing facility to Nutricia's existing operations platform.

“With this investment, Nutricia not only pursues the development and diversification of its base powder sourcing, but also reinforces its NZ heritage.”

Danone has made a damages claim of more than $300 million against Fonterra over the botulism scare last year.

The Ministry for Primary Industries is assisting the remaining eight manufacturers to be registered as soon as possible.

Thirteen manufacturing plants, including the giant Fonterra Canpac plant in Hamilton, process for their owners and other companies, which export more than 50 brands of infant formula to China.

The trade in retail-ready cans produced in NZ for China is worth $200m annually and last year NZ exported 17m cans.

The plants are also involved in a much larger trade in infant formula base powder for further processing overseas and that is a sizeable component of total NZ dairy exports to China, which were worth $5 billion last year.

In March, China sent officials from the General Administration of Quality Supervision, Inspection and Quarantine and the Certification and Accreditation Administration of China to do a systems audit.

Of the 13 NZ infant formula manufacturing plants 12 were declared to have matters to address before registration would be complete.

The six plants granted approval by the May 1 start of China’s new regime are GMP in Auckland, Fonterra Canpac, Suttons Group, Nutricia Auckland, the NZ Dairy Goat Co-operative, in Hamilton, and Westland Milk, in Hokitika.

 

 

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