Monday, October 14, 2013

Dairy Product Safety on the Agenda

Ensuring food safety and raising consumer confidence has been the central preoccupation of the whole dairy industry this year. In this context, the 19th annual meeting of the China Dairy Industry Association (CDIA) was held on 13-15 September in Fuzhou, Fujian province, with the theme of safety, responsibility, reputation, according to Dairy Products China News 1310 issued by CCM.
Due to the efforts made by the Chinese government and the dairy processors,the dairy industry has continued in its recovery with slight growth. According to the data from the National Bureau of Statistics, dairy output reached 13.1 million tonnes in H1 2013, with a YoY growth of 11.6%. From this figure, liquid milk/yoghurt and milk powder/formula reached 11.3 million tonnes and 0.8 million tonnes, up 12.4% and 5.9%respectively year on year. Meanwhile,the dairy industry recorded a net profit of USD1.4 billion (RMB8.7 billion) in H1 2013, up 23.6% YoY.
However, consumer confidence in domestic dairy products is far from restored, which can be reflected by a number of data. China imported 91,500 tonnes of infant formula (in retail packaging) in 2012, up 16.9% over 2011, while it imported 56,000 tonnes in H1 2013, an increase of 28.5%.Imports of liquid milk increased from 40,500 tonnes in 2011 to 93,800 tonnes in 2012 and then rose to 96,000 tonnes in H1 2013, up 152% over H1 2012. Moreover, all these figures exclude the volumes coming in directly as a result of consumers’ overseas purchases.
Additionally, the dairy industry continues to face insufficient milk supply. This has been underlined with the shortages in availability of domestic liquid milk in some cities since early September (this has been seen in diverse locations including Guangzhou, Shenzhen and Jinan). The shortage stems from falling cow numbers in key milk production areas as household producers have been exiting the market, leaving the large-scale dairy farms unable to keep pace with demand. The interrupted supply of milk powder from New Zealand has also played a part here of course. It appears likely that some companies will aim to safeguard their profitability by decreasing production of mid-market and low-end liquid milks in order to maintain output of premium products.

Promoting the safety and quality of dairy products is still the key task for the Chinese government. According to Mr. Ma Chunliang, Deputy Director of China Food and Drug Administration(CFDA), the Detailed Rules for Infant Formula Processor Approval will be released soon: this is in review phase,with 10,000+ opinions submitted from the public on its topics (please see Dairy Products China News Vol.6 September Issue, p8). The CFDA is now formulating other policies and measures, such as regulations controlling infant formula sales in pharmacies, labelling and packaging for infant formula, plus a system recording production information on the infant formula processors.
By the end of June, 917 dairy processors had received production licenses compared with 716 at the end of 2011. From the latest figure 128 are infant formula processors, compared with 119 at the end of 2011. Mr. Song Kungang, the CDIA’s Director, noted that China’s dairy industry has entered into an adjustment and refinement stage, and especially the infant formula industry will face consolidation as a number of dairy processors will be eliminated in the near future. (Note: some earlier figures put out on the total number of processors were lower due to the exclusion of small scale dairy companies). The changes on pharmacy sales are important when it is considered that dairy products sell at an estimated 2.1 million individual points of sale (that is retail stores of all types) around the country as against infant formula selling through just 500,000.
Mr. Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology (MIIT), indicated that the acquisition and reorganization of the dairy industry will be promoted by both market mechanisms and government guidance. The key factors of production– inputs to the production process, including land, capital, information, etc – will be concentrated amongst the leading companies upon which the government will focus its support and also its pressure to upgrade. In addition, large-scale companies are encouraged to merge and reform small-scale companies; middle and small scale companies are encouraged to merge and set up industrial alliances; moreover MIIT is also encouraging competitive and listed companies to put in place international business strategies.
It’s worth noting that the China Chamber of Commerce of Foodstuffs and Native Produce (CCCFNP) established a dairy product imports working group on 11 September, part of the Chinese government’s move to ensure the safety of imported dairy products. This working group will specialise in solving the problems faced by the growing number of dairy product importers – currently, 1400+ import agents of dairy products have been recorded by the CCCFNP.

Table of Contents of Dairy Products China News 1310:
Key Processors’ Performance in H1
Dairy Product Safety on the Agenda
Dumex Caught in Bribery Scandal
Government Further Promotes Infant Formula Consolidation
Hebei Promotes Milk Powder/Formula Industry Development
Huishan Dairy IPO and Listing
Beijing Sanyuan to Expand Formula Business
Shengmu Farming Plans for Organic Growth
Tianyou Dairy Targets Infant Formula
Modern Dairy Performs Well in 2013
Yinqiao Biotech Launches New Fresh Milk
Treasure of Plateau Launches Yak Milk Infant Formula

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