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Formula scandal sends Fonterra’s Beingmate into the red

By RJ Whitehead

- Last updated on GMT

Formula scandal sends Fonterra’s Beingmate into the red

Related tags: Infant formula, Codex alimentarius

Fonterra's Chinese business partner has seen healthy expected profits turn into substantial anticipated losses for the first-quarter of the financial year after a milk powder scandal.

Beingmate had earlier predicted a US$14.8m profit, but its latest forecast revised this to a loss of US$31.3m-33.7m due to "fake infant formulas​”.

The Shenzhen company’s name suffered in an incident last September when a ring was found to be buying cheaper milk powder and repackaging it as Beingmate. Shanghai police found more than 20,000 empty containers of Beingmate and other formula brands and 65,000 sets of labelling materials.

Fonterra invested US$492m for an 18.8% stake in Beingmate last March to give it better access to the Chinese dairy market. The New Zealand dairy is currently finalising product trials and is in the final stages of regulatory approvals to manufacture formula at a Victoria plant for export to China. 

Currently, the only Fonterra infant formula sold through Beingmate is its Anmum infant formula, which is manufactured in New Zealand

Fonterra said it remained confident about the partnership, which was "part of its long term business in China​".

The New Zealand co-operative’s chief financial officer Lukas Paravicini described the Beingmate forecast as "a responsible signal to the market. We will wait to see their detailed half-year results”​.

"We continue to see good growth in our Anmum sales in China. The infant formula market in China remains strong and in the last 12 months to May, infant formula sales were up 47% compared to the same period last year​," Paravicini told Stuff​.

Sales of infant formula are expected to grow to over US$50bn by 2020 from US$19bn last year, according to Euromonitor forecasts.

More stories from China…

China’s delivery platforms get new food safety regulations

Food sold online will be governed from October by new food safety regulations that will bring strict penalties for violators, the China Food and Drug Administration has announced.

e-commerce

The regulations place the onus on platforms to vet and monitor their partners, and provide detailed records, said Cui Enxue, the CFDA’s head of inspection.

Delivery business operators should report violations of food safety laws to local food and drug authorities, and should stop using the services of providers who have been investigated or convicted for food safety issues, the regulation said.

Moreover, online sellers should get permits and licenses before commencing business, and should publish those prominently on their e-shops.

Platform providers face fines of up to 30,000 yuan (US$4,500) for violations, and can be held criminally responsible in serious cases, the CFDA announced.

According to Cui, online providers can be held accountable if consumers are harmed by food products purchased on their platforms, and compensation should be provided if the sellers cannot be found.

In March, the Shanghai Municipal Food and Drug Administration fined online food delivery service ele.me 120,000 yuan for allowing unqualified food vendors to operate via its mobile app.

The regulation also covers restaurants where food is prepared for delivery after orders are received online. The owners of the restaurants must also secure permits.

“It's a challenge for us to put all of them under effective supervision that will ensure all the cooks are healthy and that the raw materials used in the dishes are fresh," Cui said.

Taiwan reviews safety of two flour additives

Taiwan’s food safety authorities are evaluating whether regulations governing the use of two additives to flour products should be amended.

Noodles

The Food and Drug Administration announced that it was assessing the safety of azodicarbonamide (ADA) and benzoyl peroxide (BPO) due to their adverse effects on some people.

Yet the additives have been legal in Taiwan for more than 20 years. ADA, which is used as a quality improvement agent and can make dough rise faster, is banned in food use in Europe and Australia, while flour bleaching agent BPO is banned in Europe and China.

The issue was brought to light recently in a Taiwanese newspaper story which discussed BPO and ADA and their use in improving the colour and texture of chewy white bread and noodles.

People with weak liver function might have difficulty metabolising BPO, which breaks down benzoic acid and oxygen. Children exposed to the additive may have higher risks of developing attention deficit hyperactivity disorder. It can also trigger allergic reactions or asthma in some people.

Taiwan allows the use of ADA in food products at levels below 45 parts per million (ppm) and BPO at levels below 60ppm, though the chemicals must be listed on product labels.

Food companies that do not reveal [the use of BPO or ADA] on their labels may face a fine between NT$40,000 and NT$4m [US$1,247-124,727],​” FDA food safety official Hsu Chao-kai told Taipei Times​.

To decide whether the chemicals should be removed from the list of food additives or whether regulations need to be amended to tighten standards, [the agency] will need to conduct more evaluations​.”

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