Melamine scandal 'potentially very damaging' to Chinese ingredients industry

China is one of the fastest growing markets for food ingredients and additives, accounting for an estimated 15 per cent of global trade, according to a recently published Leatherhead report.

The country has established a particularly strong position as a supplier of MSG and xanthan gum, but has also gained around a 40 per cent share in world supply of lactic acid and emulsifiers, stabalisers, and thickeners.

Ambitions to take an even greater share of global supply could now be threatened.

Two fresh cases of melamine tainted milk in December are to blame, and in particular the discovery that the Chinese authorities took almost a year to act on reports that Shanghai Panda Dairy Company was selling toxic milk products.

Food safety law​

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.”​

China has dealt harshly with the perpetrators of the 2008 melamine sandal, executing two people and jailing 19 others for sickening 300, 000 and causing six deaths.

To prevent any reoccurrences, a new food safety law came into effect in July last year establishing standards, better testing systems, and a process for recalling problem products.

But this has so far failed to protect consumers from melamine tainted products. Brockman said China needs to invest more in food safety and learn from other systems in developed counties if it is to restore confidence.

Supply implications​

In the meantime, the analyst said the latest melamine scandal is “potentially very damaging”​ for the Chinese position in the world ingredients market.

Conversely, he said suppliers in developed markets could benefit from a loss of confidence in Chinese companies.

On the Chinese side, dairy exports should be hardest hit, but there are likely to be important knock-on effects in other product sectors.

Following the last melamine scare, many countries imposed an import ban on dairy products from China, while trade in other food products also changed.

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 in the minds of foreign buyers.

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