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More Firms Tied to Tainted Formula

China Officials Say Industrial Chemical Was in Baby Food
September 17, 2008

BEIJING -- Authorities have found the industrial chemical melamine in baby formula made by 22 producers, suggesting China's problems with tainted baby formula extend far beyond the single company implicated to date.

The Chinese government early Wednesday increased its estimate of the number of babies sickened by the tainted formula to 6,244, including 158 who have acute kidney failure. The Ministry of Health also reported a third infant death in the widening scandal, which has again highlighted China's weak control over food and product safety.

Investigators found that 69 batches of formula made by some of China's best-known makers were contaminated with melamine, an industrial chemical normally used in nonfood products, according to a statement by China's General Administration of Quality Supervision, Inspection and Quarantine. Melamine also was found in tainted pet food exported from China to the U.S. last year. About 20% of formula brands investigated so far have tested positive for the chemical, including products made by dairy companies Inner Mongolia Yili Industrial Group Co. and China Mengniu Dairy Co., according to the regulator. Neither company could be reached for comment.

Until now, the scandal has focused on formula from Shijiazhuang Sanlu Group Co., which is 43%-owned by New Zealand dairy company Fonterra Co-operative Group Ltd.

In China, milk producers often buy raw milk from dealers and mom-and-pop operations that receive little oversight. Four milk dealers have been arrested for adding melamine to their milk to defraud quality tests before reselling it to companies such as Sanlu. One man allegedly purchased 200 kilograms of melamine last November.

China's dairy industry has boomed over the past five years. Milk formula alone is expected to bring in $3.45 billion in revenue in 2008, up 191.7% since 2003, according to market researcher Euromonitor International.

Chinese dairy companies export limited quantities of their products to other parts of Asia. Officials in the U.S. and Europe have said consumers in those regions probably aren't affected because Chinese formula isn't approved for import there. Retailers outside mainland China have begun taking some mainland Chinese products off the shelves. Hong Kong supermarket chain Wellcome announced Tuesday that it was recalling a line of iced yogurt bars by Yili, and offered its customers refunds.

Within China, authorities have ordered that the tainted formula products be recalled and destroyed. Sanlu's board chairwoman and general manager, Tian Wenhua, has been fired in the wake of the incident, according to China's state-run Xinhua news agency. She was also removed from her duties as secretary of the corporation committee of the Communist Party, Xinhua said.

Fonterra purchased its stake in Sanlu for $107 million in 2005. The New Zealand company is one of the world's largest dairy exporters with annual revenue of $11.1 billion and a presence in more than 120 markets.

Fonterra announced an additional voluntary recall of a line of prenatal milk sold in China called Anmum Materna, which the company believes to be contaminated local milk. In a statement Tuesday, it reassured consumers that all batches of the product distributed outside mainland China were produced with milk from New Zealand and are "free from any possibility of contamination with melamine from locally sourced milk."

Authorities are bracing for possible long-term health effects from the children's exposure to tainted milk, and pledging free health care for the affected children, many of whom live in poor rural areas where families are less able to afford imported milk brands. Many of the children are suffering from kidney stones, which otherwise rarely occur in infants.

"Hospitals should try their best to meet rising demands for diagnosis and treatment because the number of parents who take their children for medical checkups could rise drastically in the future," Ma Xiawei, China's vice health minister, said at a conference Tuesday.

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