Fonterra and San Lu

Since last weekend when we heard about the contaminated baby milk powder in China, the news has become worse. Now four babies have died and more than 6000 are ill including 160 who are very sick with kidney failure.

Fonterra, the New Zealand dairy company which has a 43% share in the San Lu company in Hebei province, is trying to do everything it can to put things right. Although the San Lu company knew some time ago of possible contaminated milk, Fonterra did not know until August 2nd and then had no power to recall the milk powder or close the company. This was the time of the Olympic Games and the Chinese government did not want any negative news. Finally, Helen Clark learned of the problem and she contacted the Chinese government. As a result the news became public.

Some western business experts who work in China say that Fonterra made a mistake in choosing a joint-venture with a Chinese company. It’s better for Fonterra to build its own company in China. It is hard for New Zealand companies to understand Chinese culture, business and politics. Even though Fonterra has three out of the seven board members, San Lu is a Chinese government-owned business, and Fonterra does not have much control.

San Lu wanted a joint-venture with Fonterra for the money it paid into the company ($US107 million), and for Kiwi skills and technology. For example, Fonterra has given the Sanlu company the secret baby milk formula.

Fonterra knew that the world demand for milk products is growing and New Zealand cannot supply enough. The future is in milk from developing countries.

Some people are asking why Fonterra did not find out earlier about the contaminated milk powder. Why didn’t the New Zealand embassy in China know? There were many rumours on the internet and in July, Hunan TV, a national cable channel, had a programme about babies developing kidney problems from drinking milk formula. They showed a packet of Sanlu baby formula in the background.

Now contaminated baby formula has been found in milk powder supplied by 21 other Chinese dairy companies. Many of these companies are part-owned by foreign companies such as Danish, French and American companies.

One Comments

  1. I still see many countries’ Fontera milk packaging said the milk are from New Zealand. If New Zealand cannot produce so much milk to export, why all their products said imported from New Zealand?
    Is it another scam from Fontera saying everything from them and when problems happen, they pushed away every blames again.

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