Domestic

Infant formula scare spares dairy industry

By Bao Chang (China Daily)
Updated: 2010-08-10 11:23

BEIJING - While consumers continue to wag their fingers at Qingdao-based powdered-milk maker Synutra International Inc for allegedly adding hormones to its products, the news won't have a significant impact on China's dairy industry, experts said on Monday.

In early July, after three infants in Wuhan, Hubei province, were discovered to have abnormal levels of two hormones - estradiol and prolactin - consumers blamed Synutra, the manufacturer of the infant formula they had been using.

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The infants, ranging in age from four to 15 months, had allegedly consumed the same batch of infant formula produced by Synutra.

No official tests have been conducted to show that the hormones in Synutra infant formula exceed current standard. The company has denied reports its products are unsafe.

Industry watchers say the news is unlikely to hurt the dairy sector.

"The issue won't cut dairy industry sales because the (alleged hormone incident) is still small scale," said Wang Dingmian, former chairman of the Guangdong Provincial Dairy Association.

Fu Yu, public relations director for WuMart Group, one of the largest supermarket chains in China, said retail sales of Synutra infant formula have not been hit.

Wu Zhengwu, an analyst with AJ Securities, said the infant formula market may be impacted, but the dairy industry recovery won't be impeded, as infant formula is only a small part of the market.

Foreign brands occupy 65 percent of the premium powdered-milk market, while Inner Mongolia-based Yili Group and China Mengniu Dairy Co Ltd dominate the mid-priced sector.

China's dairy industry production volume has bounced back after a melamine scandal in 2008, when several Chinese powdered milk products were found to contain this harmful additive.

Prior to that scandal, China's dairy industry sales increased more than 20 percent year-on-year. Since that time, Chinese producers have made great efforts to standardize and supervise the quality of products, resulting in a sales rebound. Figures from Guotai Junan Securities show that dairy industry output for the first half of this year is 9 percent higher than a year earlier.

Guangdong Provincial Dairy Association's ex-chief Wang said that it's unlikely manufacturers would add hormones to their products, but added the substance might have entered the food chain from dairy cattle.

Yili and Mengniu, which combined control more than 60 percent of the entire dairy market in China, have been focusing on the improvement of milk sourcing in recent years.

Currently Yili has more than 800 dairy farms in Inner Mongolia and Xinjiang Uygur autonomous regions. Mengniu, acquired by China National Cereals, Oils and Foodstuffs Corporation last year, plans to establish 30 dairy farms next year.

According to data from Euromonitor, in the next four years, China's infant formula market will increase 18.7 percent per year.