Infant formula concerns raised for Fonterra and Beingmate in China. Fonterra says it's a technical not food safety issue, plays it down

Fonterra’s relationship with Beingmate has taken another turn for the worse if the reports coming out of China are correct via “The Spinoff”.

Beingmate is accused of its infant formula containing additives that may not have come from licensed suppliers, with questions over whether the additives were certified for use.

After an audit of Beingmate’s Heilongjiang infant formula factory, Chinese authorities announced last Friday the issues, which basically consist of a DHA algae oil powder (similar to fish oil powder) used in its products which is “inconsistent with the material requirements of your company”. Several large Chinese daily newspapers have published warnings to mothers to “be aware” and one pondered whether this would re-ignite the controversies around milk powder safety in China.

Fortunately, perhaps, Beingmate is one of several companies accused of similar issues. These include Dumex China, which was previously owned by French group Danone before being sold to Yashili in 2015.

Fonterra has vigorously defended its Chinese partner and downplayed the breach as a technical issue. A spokesperson for the co-operative said an enterprise standard (individual company standard) had been used on packaging by Beingmate’s regular supplier, rather than the national food safety standard.

Fonterra said the issue was rectified the same day and there was no issue with the product.

“It was not a food safety issue, no product was recalled or removed from shelves and no warning was issued to consumers by Chinese authorities.”

However, enterprise standards within China are considered to be an inferior standard and firms are “encouraged to use/adopt National Standards, Professional Standards and Local Standards if they are available”.

A Fonterra spokesman has said that as “only” an 18.8% shareholder it was not Fonterra’s business. However, Auckland-based dairy commentator Jane Li is quoted as saying that as the second largest shareholder in Beingmate, Fonterra is liable for Beingmate’s financial losses and they can also be held liable for Beingmate’s infant formula food safety issues in China.

Li said that in February Fonterra chairman John Wilson was warned there was “a moderate to high risk” Beingmate would be implicated in a food safety issue involving infant formula in China. In March, Li also warned that financial losses in the Beingmate investment wasn’t the “worst-case scenario”, and that there was “potential for more serious risk exposure”.

Fonterra’s seemingly cavalier attitude is playing right into Acting PM Winston Peters hands and if the rumours are found to be true and especially if Chinese media ‘wind up’ consumers’ and it further worsens Beingmate’s financial state and standing in China, Fonterra’s senior management are going to come under further flak.

No-one has accused Beingmate of selling unsafe products, but they and Fonterra have been made aware that Chinese authorities were lifting the stakes around infant formula compliance, and back in March Chairman John Wilson admitted Beingmate was having difficulty in making the transition. Three months later perhaps authorities have grown tired of waiting.

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11 Comments

Watch out Fonterra, are you sure you are not being undermined?

Are you referring to their management?

I think he might be referring to "China Inc"...
I'd say that one has to "tiptoe thru the tulips" when operating in China..
They may be friends one day and not the next..
ie.. roll out the red carpet to bring in FDI , and take it way, figuratively, when it suits them..

That is right. The Chinese govt still has interest in most big business there, they are still running basically, what is a command economy. They like to be able to be in control of the supply chain and have made serious inroads here in dairy and meat processing, Fonterra is now pretty much the last bastion of NZ ownership/control, they would probably like to see that changed. With the makeup of Fonterra, even I can see that the best place to chip away at it from is China itself. I would tread very, very carefully there, or all we will have here will be the likes of Sinlait and Shanghai Pengxin.
This is my view and my view alone.

The last time they played an issue down it bit them in the ass big time. A companies in China have a track record of using additives that are not good for consumption.

You would think after the Sanlu debarcle, that their processes in China would now be squeaky clean. Slow learners, I guess!

I don't think they have any control... they are just shareholders in Beingmate, in the same way I might be a shareholder in Fletcher Building.
Beingmate can do as they please, as far as I know..

Really does make one wonder why Fonterra would piss away $750 million. Not only have they lost that money, they have put their own reputation , ( publics' view of them and perception of quality ), in regards to China , in the hands of Beingmate...

They should have learnt from the Sanlu nightmare.

A public relations and marketing nightmare....

Why would you do this....????

Fonterra has vigorously defended its Chinese partner and downplayed the breach as a technical issue. A spokesperson for the co-operative said an enterprise standard (individual company standard) had been used on packaging by Beingmate’s regular supplier, rather than the national food safety standard.

However, enterprise standards within China are considered to be an inferior standard and firms are “encouraged to use/adopt National Standards, Professional Standards and Local Standards if they are available”.

Why would one defend this...??
If Fonterra is playing a "high quality" game, why would they not Demand that Beingmate adopt National standards...

But...of course, they cant .... Fonterra is just a "passive " shareholder..

When it comes to Baby formulae, I'd think that .."Made in NZ" ..."clean green"... "high standards"... etc.. are all words that Chinese mothers would respond to...?
They might respond to a Brand that represents all those qualities..

Play with the dragon and you'll get burnt.

Only farmers money Fonterra are wasting with their experimenting in China.

Doesn't affect their pay packets one bit.

Actually it's shareholder and share fund money.