BIZCHINA / Weekly Roundup
Stricter standards needed
By LIU JIE (China Daily)
Updated: 2006-03-16 10:22
Consumer backlash against multinational food producers' shoddy practices
highlights need for tighter industry regulation
A number of internationally known brands including Nestle, Kraft,
Haagen-Dazs, KFC and Heinz have been relegated to Chinese consumer
blacklists over the past year amid controversy over questionable food
quality standards.
Consumers accuse multinational firms with good reputations in Western
countries of adopting double standards, but experts say that the
controversy shows how Chinese shoppers are becoming increasingly aware of
their interests. This can also lead the way to strengthened government
supervision.
On March 15 last year, environmental group Greenpeace reported that
products from two leading US food manufacturers Kraft's Ritz biscuits and
Campbell corn soup contained genetically engineered (GE) soybeans. Kraft
and Campbell had previously agreed not to use GE ingredients in Europe,
but haven't done so in China, Greenpeace said.
Two days after the Ritz biscuits report, the Chinese media was flooded
with news that Sudan I a red, chemical dye thought to cause cancer had
been discovered in two products sold in China: KFC's New Orleans Roast
Chicken Wings and New Orleans Roast Chicken Legs. Sudan 1 is classified
as a carcinogen by the International Agency for Research on Cancer, and
is banned under European Union regulations.
In another scandal involving a multinational brand, Haagen-Dazs was found
producing ice cream cakes without a permit next to a toilet and rubbish
bin in an ordinary apartment in Shenzhen.
All of these discoveries happened within a few months of each other, so
leading Chinese Internet portal sohu.com conducted an online survey last
June. Out of 96,218 respondents, 56 per cent say they believe the
scandals were just the tip of the iceberg. Three-fourths say they will
never trust those brands again and will be cautious when buying their
products.
"International companies should pay close attention to quality guarantees
and the safety of their products," says Zhang Wenkui, vice-president of
the Corporate Research Institute, affiliated with the Development
Research Centre of the State Council. It can take decades to establish a
brand, a company's reputation can be destroyed overnight.
Crisis management
The survey also found that a multinational's initial response to a
scandal attracts even more consumer attention, with 96 per cent of
respondents saying companies have a responsibility to stop production and
sales when any problem is found. Products should be immediately recalled
in these situations, the respondents added.
Approximately 98 per cent agree that a responsible corporate citizen
should immediately inform consumers when it discovers quality or safety
problems.
Nestle issued an apology on June 5, 10 days after excess iodine was
detected in its Jin Pai Growing 3+Milk Powder for babies and young
children. It insisted that the high iodine levels were not a threat to
public safety.
"We apologize for deviating from national standards regarding the iodine
content of some Nestle milk-based powder products," the company said. It
refused to pull the powder off store shelves or compensate
consumers,howerver.
Fang Shumin, mother of a three-year-old baby, says that she was shocked
to hear that iodine levels in Nestle Jin Pai Growing 3+Milk Powder could
harm babies.
"I'm even more astonished that this big international company did not
inform consumers immediately and refused to pull the products," says
Fang, adding that she will never buy any of Nestle's products again.
Josef Mueller, president of Nestle China, made a public appearance as a
featured guest on China Central Television's BizChina programme, where he
apologized and repeated the company line.
"This happened in spite of our total commitment to comply with national
standards," Mueller said.
Not surprisingly, critics are saying the apologies have come a little too
late for the company to reverse the damage done in the minds of many
Chinese consumers.
Qiu Baochang, a lawyer for the China Consumers' Association, was quoted
as saying Nestle was only reacting to the negative publicity, and that
the apology was only a "late response" to pressure.
An online survey taken suggests up to 87 per cent of consumers will stop
purchasing Nestle products.
Market improvement
Multinationals have managed to get away with shoddy practices and have
largely escaped serious punishment. The market is simply too immature for
the authorities to be able to effectively monitor the food production
industry, Zhang says. But foreign companies usually have their own
corporate codes, which are generally higher than China's national
standards, he adds. Problems only occur when some multinationals loosen
standards or take advantage of lax supervision, loopholes and low public
awareness.
Penalties are not strict enough to discourage this and government roles
have yet to be clearly defined at the departmental level, leading to
overlapping administrative measures or inactivity. There is an urgent
need for established product quality supervisory and recall systems
throughout the country, along with new legislation.
"China's food safety authorities are busy updating standards, and
increasing the use of new materials and new technology," says Zhang
Renwei of the Shanghai Food and Drug Administration. But new standards
must be based on research and data, two areas where China is still quite
weak.
"The most we can do is to learn from developed countries."
More cases
Camera quality
Sony Corp of China suspended the distribution of six of its digital
camera models on the Chinese mainland on December 16 after the Industrial
and Commercial Administration of East China's Zhejiang Province found
problems with the cameras' liquid crystal displays (LCDs), automatic
exposures and white balances.
The company reported that a service hotline had been set up to handle
customer concerns, but did not say how to return, repair or exchange any
of the six cameras in question.
The Japan-based electronics producer challenged the administration's
findings, but still issued another apology on December 19, saying it
would recall its six "Cybershot" models.
Misleading claims
US-based beauty products giant P&G was hit with complaints from a
Nanchang woman in March over the SKII anti-ageing De-Wrinkle Essence
skincare product. The woman said it was ineffective and sparked an
allergic reaction.
P&G was fined for misleading consumers in its skincare product ads on
April 11. The Nanchang Commercial and Industrial Bureau in the provincial
capital of East China's Jiangxi Province settled on a fine of 200,000
yuan (US$24,000) after a 20-day investigation into SKII.
The bureau has also looked into SKII's ingredients in response to another
consumer's accusations that the skincare formula contained "unsafe
materials."
P&G China spokesperson Feng Jialu insisted the product was safe, and said
the only problem was related to advertising. Sales of SKII are stable on
the Chinese mainland, but media reports have suggested that 12 per cent
of SKII's frequent users doubted the product's quality, based on a
confidential survey conducted by P&G early last April.
Cancer risk
A US study warned on April 18 that triclosan in Colgate brand toothpaste
could lead to cancer. Triclosan can react with water to produce
chloroform gas. Chloroform can cause depression, liver problems and
cancer, if inhaled in large enough quantities.
China forbids the use of triclosan in cosmetics, but has no rule on its
use in toothpastes. which is why the health authorities did not require
Colgate to pull the products from shelves as its counterparts did in
Europe. Sales of Colgate toothpaste still dropped significantly, however.
Health concern
The Shenzhen municipal government in South China's Guangdong Province
shut down a kitchen used by leading US ice cream brand Haagen-Dazs in
June after finding it lacked a permit and failed to meet health standards.
The ice cream was primarily made next to a toilet and several rubbish
bins in a house . Local government officials discovered the illegal
kitchen through a tip from another citizen.
Brand owner General Mills reported that the ice cream made in the
Shenzhen kitchen has been sent to the United States for the past five
years without incident. The case stirred public concern, and although no
other health violations were reported, business dropped sharply.
Expired food
Customers discovered expired bread and cakes on store shelves a week
after Wal-Mart Beijing Zhichunlu Supercentre officially opened last May .
The general manager of the new outlet blamed the mistake on inexperienced
employees.
Local industrial and commercial officials warned Wal-Mart, the world's
top chain retailer, to improve its supervisory system and strengthen
management. Visitors dropped sharply after local media reported the news.
National standards
Nestle's Jin Pai Growing 3+Milk Powder for babies and young children was
found to contain more iodine than allowed by national standards during a
May 25 survey by quality inspection authorities in East China's Zhejiang
Province. Similar problems were later discovered in Beijing and Kunming,
in Southwest China's Yunnan Province.
The Swiss company insisted the powder was safe and refused to recall its
products. Nestle issued a public statement on June 5 apologizing for
exceeding national standards on iodine content in some Nestle milk-based
powder products, but said the matter was not a safety or health issue.
The National Standardization Administrative Commission declared on June 8
that products in violation of national standards must halt production and
sales immediately. Nestle eventually pulled the Jin Pai 3+Milk Powder
from stores shelves across the country.
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