Distributors Say They Weren't Told Reason for Recall
(Wall Street Journal – China)
By GORDON FAIRCLOUGH and LORETTA CHAO
A Chinese manufacturer and local-government officials
declined for weeks to disclose the discovery that a popular baby formula
contained a toxic chemical even while the maker was recalling the product, the
company's foreign partner and some domestic distributors said Wednesday.
According to one distributor for Shijiazhuang Sanlu Group Co., Yu Qingyang in
the southern province
Sanlu said in early August that it was taking back
the formula because it "planned to change the packaging." China's
government says contamination of baby formula with melamine has killed three
infants and sickened more than 6,244 since the first reports of sick children
in March. The figures include 158 infants with acute kidney failure.
Authorities said this week that tests in recent days found melamine in baby formula
from 22 Chinese manufacturers, including some of the country's biggest dairy
A mother sits beside her 16-month-old child, hospitalized
for possible kidney-stone development from consuming tainted milk formula at a
hospital in Wuhan, China.
Evidence is mounting that such contamination is more
widespread in China's
dairy industry, with unscrupulous suppliers adulterating ingredients as a way
to mask protein-deficient or diluted milk. On Tuesday, a Hong
Kong supermarket chain pulled a mainland Chinese brand of yogurt
popsicles from its shelves, saying they had tested positive for melamine. The
poisonous chemical, used to make plastics and fertilizer, also boosts the
apparent presence of protein.
"It's not just a problem with Sanlu
now. So many companies have been involved," said Sherry Meng, mother of a 5-year-old boy. "As a consumer and a
mom, I feel really angry, and concerned. It makes it hard to believe in any
dairy products produced by China."
Sanlu reported to its board on
Aug. 2 , six days before the Olympic Games opened in Beijing, that its baby
formula was tainted. But public announcement of a recall came only last week,
and the delay is drawing increasingly angry criticism from Chinese parents and
others. On Wednesday, Fonterra Co-operative Group Ltd., a New Zealand dairy company that owns
43% of Sanlu, said the Chinese company told local
health authorities in early August that Sanlu had
discovered melamine in samples of its product.
Instead of warning consumers, Fonterra said, Sanlu and the local government in its headquarters city
here in northern China
decided to quietly remove the toxic formula from stores. "We encouraged Sanlu, we encouraged the authorities, to go public,"
said Andrew Ferrier, Fonterra's chief executive. "They made their own
Some critics in China have suggested on the
Internet that a desire to avoid bad news around the Olympics may have prompted Sanlu to maintain its public silence. While there is no
evidence of that, Chinese companies were under strict orders at the time not to
be the source of bad news that could disrupt the Games, and Chinese reporters
were told not to report negative news.
Sanlu executives have issued an
apology but haven't responded to repeated requests for comment. Fonterra also
has been fiercely criticized for not going public. Mr. Ferrier said that after
some "soul searching," it initially decided not to make a public
statement on its own. It only informed its own government a few weeks later.
central government said it became aware of the problem only last week.
Authorities have since announced a well-publicized recall, arrested several
suppliers and sacked several local officials, including the head of a local
food-and-drug agency. On Wednesday they detained for questioning Sanlu's former chairwoman, who was fired this week.
Two of the companies whose products contained melamine have
sold infant formula in Bangladesh,
Burundi, Gabon, Myanmar
according to the authorities. It isn't clear whether any of the exported
formula was contaminated. Sanlu milk powder exported
has been recalled there.
The magnitude of China's adulteration problem
underscores the risks in the country's often-diffuse
and poorly regulated supply chains for foods, pharmaceuticals and other
has struggled to tighten oversight after a series of high-profile safety lapses
-- including pet food contaminated with melamine and toothpaste tainted with a
chemical used in antifreeze. Adulterated supplies of the anticlotting
drug heparin from China were
linked this year to more than 80 deaths in the U.S.
Many companies doing business in China strictly supervise suppliers
to ensure their materials are safe. Bristol-Myers Squibb Co.'s Mead Johnson
baby-formula unit said it imports all the milk it uses to manufacture formula
at its plant in southern China
because it considers the local supply chain too unsafe to use. GroupeDanoneSA's
International Nutrition Co. unit also says it uses only imported milk for the
baby formula it makes in China.
Nestlé SA said it buys milk from local farmers who are supervised daily by its
own agricultural officers.
Sanlu buys milk from many sources,
including milk traders who buy raw milk from small farmers and mix it together
before reselling it. Police have arrested three milk dealers, including two
brothers who live in Sanlu's hometown. The pair began
putting melamine in their milk last year to pass Sanlu's
quality tests, according to China's
official news agency, citing a police spokesman.
Agriculture experts say the way Chinese dairy farmers raise
cows can result in protein-deficient milk. Some government officials also have
surmised that dealers have been diluting their milk to maximize profits and
using melamine to mask their actions.
Milk production has grown rapidly as farmers in recent years
rushed to raise dairy cows, outstripping demand. As a result, many dairy
farmers are struggling. Fu Guofang, a 48-year-old
dairy farmer in Zhejiang
province, said he sold about half his herd last year when milk prices dipped.
"It is true milk farmers add water to raw milk when the purchasing price
is too low," said Mr. Fu. But he said he doesn't think farmers know enough
to add chemicals to the milk.
Sanlu began investigating reports
of illnesses among children drinking its formula as early as March, according
to Fonterra. Fonterra's CEO, Mr. Ferrier, said repeated lab tests over the
following months failed to find any problems. Meanwhile, Sanlu
donated baby formula to victims of the Sichuan
earthquake in May.
Shortly before a Sanlu board
meeting Aug. 2, the company discovered melamine in the formula, and promptly
informed its directors including three Fonterra representatives, Mr. Ferrier
said. He said Fonterra urged an immediate public recall.
But local authorities said they "were not in a
position" to make a public announcement, Mr. Ferrier said. "They were
very clear about how they wanted to proceed."
When weeks went by with no public comment from the Chinese
authorities, Fonterra reported the situation to the New Zealand government. New Zealand
Prime Minister Helen Clark was informed, and she ordered her ambassador in Beijing to notify
authorities there. The ambassador did so Sept. 9, said Ms. Clark's spokeswoman.
central government said it was informed of the problem by provincial
authorities Sept. 8 and quickly responded. 9-18-08