Sunday, October 12, 2008

The China Syndrome: One Month Later

One month ago today, the government of the People's Republic of China ordered the recall of 700 tonnes of Sanlu Bei Bei Infant Powder after the melamine-contaminated dairy powder was linked to the death of one baby and the illness of 50 more. The melamine had been added deliberately to fluid milk in order to boost its apparent protein content and meet dairy company purchasing standards.

In the space of just one month, what began as a Chinese food safety problem has engaged the attention and resources of food safety agencies around the world. It has triggered the toppling of industry and government officials in China. It has forced public health agencies to devote enormous resources to tracing dairy products imported from China and testing those foods for melamine. It has caused international health agencies and national governments to reappraise their standards for determining an allowable level of melamine in foods. It has taken a toll on the reputations of several international food brands. But, most importantly, it has taken a toll on the lives and health of more than 50,000 Chinese children and their families.

The Human Impact
According to the PRC government, melamine-adulterated milk products have killed four babies and sickened approximately 53,000 more. Those statistics have not been updated since we first reported them on September 22nd. A Reuters report, carried by CBC on October 8th, however, suggests that the adulteration may have been responsible for nearly 94,000 illnesses. The two hardest hit provinces – Henan and Hebei – account for almost half of the victims, with approximately 30,000 and 16,000 victims, respectively.

There have also been a scattering of illnesses outside mainland China. Hong Kong and Macau have reported a combined total of seven infants and children suffering from kidney stones.  Three children in Taiwan also were hospitalized for kidney stones after drinking melamine-adulterated milk from China.

Outside the region, there have been no illnesses reported so far. But North American families who adopted babies from the PRC are watching and waiting. One family in Nova Scotia, for example, has learned that their infant was fed Sanlu infant formula before being adopted. As of last week, the family was waiting to learn whether the formula given their adopted infant was one of the melamine-contaminated Sanlu brands. Meanwhile, they have taken their baby for medical tests in an effort to anticipate and prevent melamine-related health issues.

China's Regulatory Response
After a slow start, the PRC has taken several actions to contain the problem and repair its food safety reputation, including:
  • The head of the country's food safety agency resigned; at least one other government official was fired, as was the Sanlu Group's general manager. 
  • The government has detained or arrested 32 people in connection with the adulteration scheme so far.
  • On Thursday, October 9th, the PRC issued a series of new quality control regulations for dairy products. These regulations include maximum permitted levels of melamine in liquid milk, milk powder and any food products that contain at least 15% milk. They also provide for regular inspections of dairy products, and stiff penalties for any individual or company caught violating the new regulations. 

International Regulatory Response
Countries on every continent (except Antarctica, of course) have reacted to the melamine adulteration problem in one or more ways:
  • by banning – completely or selectively – milk or milk-containing products from China;
  • by inspecting retail outlets to find and remove Chinese-made milk products;
  • by sampling suspect products and conducting lab tests for melamine; 
  • by issuing recalls of specific items shown to contain melamine; and
  • by agreeing, in most cases, to a consistent international standard for maximum allowable levels of melamine.

Impact on Food Companies Worldwide
China's dairy companies have been hard-hit. Sanlu, Yili, and Mengniu were the best known among 22 milk companies that produced melamine-contaminated baby milk powder. Chinese food processors that used liquid milk or milk powder to produce items such as candies, biscuits and frozen dairy treats also felt the impact of the adulteration scandal. Brands such as White Rabbit, Mr. Brown, and Lotte Koala have been the objects of international recalls.

Food companies with headquarters outside of mainland China haven't been immune, either. Products manufactured in China – or manufactured elsewhere, but with a dairy ingredient from China – and sold under brand names that include Cadbury, Heinz and Nestlé also have been found to contain melamine, and have been withdrawn from sale, either voluntarily or involuntarily.

The Fonterra Fumble
The non-Chinese corporation with the most to lose – in reputation and in profits – from this international adulteration mess is New Zealand's Fonterra, the owner of a 43% stake in Sanlu.

We reported the sequence of events on September 15th, but the information bears repeating and expanding:
  • Sanlu admitted to having received complaints as early as March 2008. 
  • Sanlu advised its Board of Directors, which includes representatives of Fonterra, about the melamine problem on August 2, 2008.
  • Fonterra advised New Zealand's embassy (in Beijing) of the problem on August 14, 2008.
  • The embassy informed the New Zealand government of the problem only 17 days after being briefed by Fonterra.
  • New Zealand's Prime Minister Clark was advised of the melamine contamination on September 5, 2008
  • Clark convened a meeting of senior ministers on September 8th, and ordered them to press for a recall.
  • The PRC announced a recall of Sanlu baby milk powder on September 11th.

While it was far from the only dairy company implicated in the melamine adulteration scandal, Sanlu's milk powder contained the highest level of melamine, by far – 2,563 ppm. And the company stands accused, not only of dragging its feet, but of trying to pay off the media to prevent news of the adulteration from leaking to the public.

Two Chinese families of sick babies who were fed Sanlu baby milk powder formula have filed lawsuits against the company for compensatory damages. There is, as yet, no indication of whether the government will allow those lawsuits to proceed. Meanwhile, Fonterra is discussing with the Chinese government how the New Zealand company can help to support the affected families financially.

What Next?
China must establish confidence in the international community that its food products are safe to eat. For obvious reasons, it has begun with the dairy industry. Earlier today, the Chinese government announced that it has tested more than 4,200 batches – representing 131 different brands – of liquid dairy foods produced after September 14th, and that every batch met the newly implemented melamine limit of 2.5 ppm for liquid milk and 1 ppm for infant formula. This is a first step.

For China to gain the confidence of international consumers, it must extend its new, strict food safety regulatory regime to all food products and animal feeds. And, by releasing timely, accurate information on food safety issues, it must provide convincing evidence that its new regime is working.

This cannot happen overnight. Until it does, foods containing ingredients made in China will be viewed with suspicion by consumers around the world.

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