Media Article: Five infant formula makers comply with new Chinese regulations
Source: FW PLUS: Five infant formula makers comply with new Chinese regulations
Author: Hugh Stringleman
Date: 02 May 2014

The purity and safety image NZ represents is needed in China at present to satisfy consumer demand.

Five infant formula manufacturers producing 90% of trade volumes have complied with new China market access requirements on the May 1 deadline, two Government ministers have announced.

The Ministry for Primary Industries (MPI) is assisting the remaining eight manufacturers to be registered as soon as possible, Primary Industries Minister Nathan Guy and Food Safety Minister Nikki Kaye said.

Thirteen manufacturing plants – including the giant Fonterra Canpac plant in Hamilton – process for their owners and other companies, who export more than 50 brands of infant formula to China.

The trade in retail-ready cans produced for China is worth $200 million annually.

The trade in retail-ready infant formula cans produced in NZ for China is worth $200 million annually.

It is a large portion of Chinese retail sales of infant formula because of the purity and safety image of NZ which China needs at present to satisfy consumer demand.

NZ dairy companies also take part in a much larger trade in infant formula base powder for further processing overseas and the country’s total dairy exports to China reached $5 billion last year.

China implemented a registration process on foreign plants and brands as part of a cleanup of its domestic infant formula trade after the melamine adulteration scandal of 2008.

In March it sent officials from the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the Certification and Accreditation Administration of China (CNCA) to conduct a systems audit.

Five of the 13 NZ infant formula manufacturing plants were visited and 12 plants were subsequently declared to have matters to address before registration would be complete.

A month after the inspection Guy and Kaye said last week they were confident the majority of NZ plants and brands would comply and that the trade would not be disrupted.

But 10% of brands might have more complex requirements.

“Chinese officials have made it clear that they will require a close association between the brand owner and the manufacturer,” Kaye said.

“In practice, that means the brand owner having clear control over the manufacturing process and the product formulation for their brand.

“While the news is positive for manufacturers, for brand owners without a close relationship with the manufacturer the bar is going to be set high and some will struggle to meet the new rules.

“MPI has been working with the industry and Chinese agencies to give brand owners greater clarity on what ‘closer association’ will mean and when this will apply,” Kaye said.

The ministers’ first statement, just before Anzac Day, set off a flurry of compliance activity and speculation – MPI sent deputy director-general, Roger Smith, to China to assist the process.

Infant formula exporters complained that MPI and the relevant ministers had deliberately tried to minimalise the issues involved in satisfying the new Chinese requirements.

‘Chinese officials have made it clear that they will require a close association between the brand owner and the manufacturer.’

“Having known for a year that China would seek the regulation of facilities that met their standard, MPI has persisted in public statements about everybody being ‘nearly there’.

“But brand owners and exporters didn’t know what was required of them right up until the May 1 deadline,” said one exporter.

By conducting a “systems audit” process the Chinese agencies ensured that MPI retained the delegated authority to approve and register each plant and brand.

Therefore, China did not insist on visiting and approving every plant as has been the protracted business facing the meat industry.

The only infant formula processing plant out of 13 to pass the CNCA audit without problems was GMP Dairy in Auckland, a plant opened by Prime Minister John Key in July 2012.

At the time GMP, an Australian-owned investment company, said the new plant was built to address a rapid increase in global demand and a shortage of high quality wet dairy infant formula products.

GMP predicted it would produce 20m cans a year – it contract packs for companies owning three infant formula brands, two of them exporting.

The dairy capability was an addition to a pharmaceuticals plant for contract manufacturing which fits the Chinese intention to include infant formula production and sales under pharmaceutical regulations.

Four other major processing plants inspected by CNCA were Fonterra’s Canpac in Hamilton, the Sutton Group plant in Auckland, the Nutricia plant in Auckland, and the Dairy Goat Co-operative plant in Hamilton.

Subsequently passed for exporting were Canpac, Sutton, Dairy Goat Co-operative, and Westland Milk Products, which along with GMP, pack 35 brands.

These brands have been give temporary approval for China according to the Infant Nutrition Council.

Guy said there was no brands register yet and the Government would need to work hard to get the other eight manufacturers approved and to provide the smaller brands with their requirements.

In the wake of last year’s Fonterra botulism precautionary recall of whey protein concentrate and the resulting legal claim by Danone, NZ subsidiary Nutricia has been out-sourcing infant formula paediatric base from Ireland.

That may have been a complication for the Chinese audit.

It has just made a further move to reduce reliance on Fonterra, the dominant infant formula base manufacturer.

Nutricia announced it intended to purchase the Sutton Group and its joint venture milk powder plant in South Otago, Gardians, which is supplied by 18 dairy farms owned by Grant Paterson.

“This transaction will provide Nutricia with a large milk drying capacity, along with a long-term fresh milk supply access.

“It will also add an infant formula blending and packing facility to Nutricia’s existing operations platform.

“With this investment Nutricia not only pursues the development and diversification of its base powder sourcing, but also reinforces its’ NZ heritage.”