With four babies dead and thousands more needing hospital treatment, the scandal of Chinese infant formula deliberately adulterated with the industrial chemical melamine has had a mixed effect on China's dairy industry. While the country has seen a massive rise in milk powder imports this year, there have been reports of strengthened brand loyalty for many of China's dairy brands and no signs of a general flight from milk consumption, although the latest figures from TNS still make for pretty grim readi
ng.According to the United Nation's Food and Agriculture Organisation, some 54,000 babies have needed medical treatment in China after being fed melamine-contaminated dried milk formula, which can lead to kidney problems. Almost 13,000 were hospitalised, and four have died.
Andrew Liu, founder and chief consultant of CNutrInfo, food market research consultancy in Guangzhou in southern China, says that 22 people suspected of being involved in the illicit manufacture and sale of melamine-adulterated dried milk powder have now been arrested by the police and the underground factories destroyed. Also, he says, San Lu, the company that produced the melamine-adulterated milk powder and infant formula, is now nearly bankrupt and faces being acquired by other dairy companies.
"The San Lu brand is now a negative asset. San Lu's bank account is in deficit. But companies are trying to acquire San Lu because it has a good facility and a good sales network," says Liu. San Lu is currently 43% owned by New Zealand dairy co-op Fonterra.
In Europe, EU Member States are now required to inspect any Chinese products containing more than 15% milk, and any product found to contain more than 2.5mg/kg of the chemical has to be destroyed.
But despite the crisis, the melamine scandal has not led to a big influx of imports from European dairy companies. Indeed, the countries that seem to be benefiting from the crisis at the moment are New Zealand and Argentina, says Liu.
"According to Chinese customs statistics, the import of foreign milk powder has increased this year. From January to September there was a big increase of 86% in the imported value. The origin country of the milk powder is New Zealand and Argentina."
The high end of the dried milk market is controlled by major brands like Mead Johnson and Nestlé, says Liu. "These brands dominate the Chinese milk powder market. Most of the melamine-contaminated infant formula went to the rural and small-city market place where the consumer could not afford high quality and expensive brands. Melamine was a cheap way of increasing the apparent protein content in infant formula."
According to Mike Underhill, managing director of media and advertising consultancy, All Media Count, based in Beijing, the effects of the melamine scandal on dairy imports into China will be negligible. "The industry here is very cost driven and Chinese consumers have not generally had a 'look inside' mentality when it comes to food ingredients."
A recent study by All Media Count, 'Tainted Brands', finds that Chinese milk consumers have had their confidence in milk brands badly shaken. But there is not likely to be any flight from milk. On the contrary, says Underhill's report, the incident has made milk consumers more loyal.
Yes, the melamine scandal has raised the Chinese people's consciousness of quality, says Underhill, but even in the middle of the scandal, China was still rated as the third most positively viewed milk producing country, after Australia and New Zealand. The UK, Denmark and France were all rated lower than China, he says. "So, even with this scandal, it seems there is not yet enough equity in the European 'brand' to tip the scales in terms of consumer perceptions."
The melamine scandal first hit the headlines at the end of 2006 with pet food imported into the US. Packs of wet pet food where found to contain melamine-adulterated wheat gluten from a single Chinese company. Then contaminated rice protein from a different source in China was also identified as being associated with kidney failure in pets in the United States.
Melamine is a widely-used and relatively cheap chemical used to make plastics such as melamine plates. What appears to have interested the criminal fraternity in China is that melamine is a small molecule with a high nitrogen content. Each molecule contains six nitrogen atoms, three carbons, and six hydrogens - a very high ratio of nitrogen for each molecule.
But protein also has a high nitrogen content; and in the food industry, protein levels in gluten, dried milk and other ingredients are generally assessed by an ingredient's total nitrogen content using the relatively simple and cheap Kjeldahl method.
Thus Chinese suppliers trying to cheat and cut costs added melamine to wheat and rice gluten and to watered-down milk before the milk was converted to dried milk powder. Melamine was chosen to avoid being found out in tests routinely used for other illegal non-protein high nitrogen compounds such as urea and ammonium nitrate.
Liu explains: "San Lu purchased raw milk from farmers through milk stations. Melamine was added at the milk stations. The milk station owners sourced the fake protein powder underground in illegal factories where the melamine and emulsifiers, for example non-dairy creamer, were used to formulate the fake protein powder. The milk station owners added the fake protein powder into raw milk and then shipped it to the San Lu dairy plant."
But one reason for the delay in identifying melamine as the cause of the illness in pets and babies is that it is not very soluble in many of the chemicals typically used to extract materials to find out what might be in them, says Jerry Zweigenbaum at laboratory test equipment supplier, Agilent Technologies. Agilent has a subsidiary in Shanghai and has developed approved liquid chromatography and mass spectroscopy methods for identifying melamine in foodstuffs. "If you can't extract it you can't analyse it and you won't see it," he says.
Similar techniques for testing for melamine in foodstuffs have now been developed by other laboratory equipment suppliers such as Thermo Fisher Scientific and are now becoming widely available in suitably-equipped food testing laboratories.
But the tests don't come cheap, says Zweigenbaum. "If you use liquid chromatography, a test might cost you $20-$30 a sample. If you go to the more precise liquid chromatography/mass spectrography (LC/MS/MS) test, then $100 to $200 a sample might not be unreasonable. Whereas the Kjeldahl nitrogen test is $1 a sample.
"If labs and food manufacturers already have the equipment, that takes a little of the bite out of the cost. But they are all added costs for the manufacturer."
But could the melamine scandal have been avoided? Possibly, according to Declan Naughton, professor of biomolecular sciences at Kingston University, Surrey, UK.
In a recent paper based on a study of world-wide food recall patterns, Naughton found that 10 countries were responsible for 60% of all faulty products marketed, with China at the top of the list. "The main message from the paper is that China is very good at producing faulty foods and very bad at actually telling anybody about it."
Naughton is now taking his research further and developing a "prediction engine" or computer program that should be able to predict future food alerts. The idea, he says, is to set thresholds for food alerts, so that if, say, melamine came up twice in a year for a country, that might not indicate a problem. But if melamine came up four times, say, then there could be a problem.
"It would work like this: as weekly food alerts are produced, the information is loaded into our prediction engine. And when they get to a certain threshold, it says: 'Keep an eye on this, we've had four alerts in four months - much more than last year.' Then the alarm bells ring and we can take a closer look. We've applied for funding to develop it and we are working closely with the Laboratory of the Government Chemist in London. Hopefully it will be out in a few months."
But while we wait to see how useful a catch-all prediction engine might be, Zweigenbaum believes there is a more straightforward approach. "What I would be looking for is a much better test for protein, not just nitrogen."