Analyst unpicks impact of melamine scandal on Chinese dairy industry

Two fresh cases of melamine tainted milk in December have put into doubt the effectiveness of new legislation on food safety that came into effect last July.

Of particular concern is the revelation last week that the Chinese authorities took almost a year to act on reports that Shanghai Panda Dairy Company was selling toxic milk products.

Food safety legislation ​

Leatherhead market intelligence manager Chris Brockman said: “China has tried to make a big deal about food safety changes but clearly the processes in place are not as rigid or structured as they need to be.”​

The fallout from the latest melamine cases is set to be significant. Brockman said the 2008 melamine scandal, which sickened 300, 000 and caused six deaths, virtually wiped out the dairy export industry.

This time around no illnesses have been reported but Brockman said the circumstances surrounding the Shanghai Panda case could be very damaging.

The analyst said the scare puts into question the effectiveness of the food safety measures taken since 2008, especially given the time taken to investigate and close the dairy plant.

He said the news is likely to set back the dairy industry by at least two years.

Chinese demand for dairy products may well be hit. Brockman said: “Chinese consumers are now very sensitive to these food safety issues.”​

Value of reputation ​

Confidence among foreign buyers will also be eroded, and the fallout may well extend beyond the dairy arena. Alex Filz, a spokesperson for Dutch supplier DSM, refused to comment on how trade values would be affected, but said the new melamine cases will raise the importance of quality awareness and safety for foreign food manufacturers. .

Filz said the reputation of a supplier will be all important. Importers need credible assurances beyond certification.

Brockman said China needs to invest more in food safety and learn from other systems in developed counties if it is to restore confidence.