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Tainted milk crisis hits more global companies

Elaine Kurtenbach, Capital Press 9/26/08

SHANGHAI, China (AP) - The roll call of companies facing potential recalls grew Friday, Sept. 26, as reports of foods tainted with the industrial chemical, which has been blamed in the deaths of four Chinese infants, spread to a widening range of products.

Food companies around the globe are rushing to assess their products and in some cases setting new strategies to prevent problems.

"We have to think about any processed food with milk or protein in it," said James Rice, a food industry veteran who is now China country manager for Tyson Foods Inc., the world's largest meat processor.

While his company is not affected, for others "that includes biscuits, cake mix, energy bars, anything that should have protein in it," he said.

Many food companies already were taking special precautions before Chinese milk suppliers were found to be adding melamine to watered-down raw milk to boost its apparent protein content. The compromised dairy products are blamed for sickening 54,000 babies.

Some companies learned the need for extra diligence in China the hard way, during a spate of scandals last year from unsafe foods and toothpastes to melamine-laced ingredients in pet food.

But many continued to disregard the risks, said Jeremy Haft, a businessman who runs factories in China in a variety of industries including medical products, clothing and building supplies.

"I don't think much was learned from the recalls of a year ago," said Haft, who has written of his experiences in a book, "All the Tea in China."

Tokyo-headquartered Lotte Group, a major snacks maker, got caught up in the storm Friday after its popular chocolate-filled Koala cookies were recalled in Hong Kong and Macau because of melamine contamination.

Packages of the cookies, still on sale in Shanghai, list whole milk powder as an ingredient.

"We will look deeply into all the details of the manufacturing process," said Kayh Kim, manager of Lotte China Food's planning department in Beijing. "We really don't want to lose our customers' confidence."

In Tokyo, a company spokeswoman said Lotte products sold in Japan are not made with Chinese dairy ingredients.

Meanwhile, the Shanghai-based maker of White Rabbit, a popular milk-flavored toffee, said it stopped domestic sales after the Hong Kong government's Center for Food Safety said the candy contained more than six times the legal limit of melamine.

That followed White Rabbit recalls in Britain, Singapore, New Zealand and Australia.

When rumors of melamine-related recalls of Oreos and other sweets spread by phone text messages and on the Internet earlier this week, Kraft Foods Inc. hastened to reassure customers that none of its Oreo-brand products contain milk powder from China.

"Regardless of where they are produced, Kraft products are always held to the highest quality and safety standards," the company said. Oreo fillings contain no milk, while Oreo cookies with icing on them use milk powder from Australia, it said.

As they expand operations in China, targeting its potential market of 1.3 billion people, many foreign-brand food companies still rely too heavily on local partners for quality control, experts say.

New Zealand's dairy cooperative Fonterra discovered that when its local partner, Sanlu Group Co., failed to take quick action after Chinese doctors reported that babies drinking its infant formula were developing kidney stones.

"The problem was that Fonterra, right from the start, had no control over what was going on," said Bruce McLaughlin, CEO of Sinogie Consulting in Shanghai, which conducts market research and investigations.

"The most important thing is that if you're going to make an investment and have your name tied up with it, you have to have control over what's going on," McLaughlin said.

For some, that may mean going it alone.

Chocolate maker Barry Callebaut, the world's leading producer of cocoa, chocolate and confectionary products, set up its own factory west of Shanghai earlier this year. The quality control staff report directly to the Swiss company's CEO.

The factory is testing milk products from all local suppliers, setting aside any from domestic sources until it is confirmed safe, said Gaby Tschofen, the company's vice president for corporate communications.

A decision by Japanese beer maker Asahi Breweries Ltd. to set up its own dairy farm in China is proving fortuitous: the company's own high-quality milk, launched just this month, is selling fast amid the ongoing melamine scare.

Asahi Green Source Farm, a venture with fellow Japanese companies Itochu Corp. and Sumitomo Corp., is stocked with more than 1,000 dairy cows from Australia and New Zealand, said Chen Na, a marketing department staffer.

"We already realized the importance of the source of raw milk, since it's easy for trouble to crop up in a booming market, and we have made every effort to control the manufacturing process for liquid milk production," she said, adding, "Better safe than sorry."

Copyright 2008 The Associated Press.