Infant formula companies are shocked after learning the
details of new regulations they will face from next month
when selling product in China.
The rules, which come into force on May 1, will require baby
milk brands to have "clear control" of the manufacturing
process and a "close association" with manufacturers to gain
registration with the Chinese Government.
Food Safety Minister Nikki Kaye revealed yesterday that about
10 per cent of the $200 million of infant formula New Zealand
exports to China annually was produced by firms that do not
own factories and instead have their products produced at
contract manufacturing facilities.
Around 50 companies producing roughly 70 brands operated in
this small-scale end of the market, she said, while the
remaining 90 per cent of baby milk exports to China were
controlled by larger-scale manufacturers.
Kaye said the new import requirements would have "a very
significant impact" on exporters who are unable to
demonstrate a close association with a manufacturer. "Our
embassy in Beijing is seeking transition arrangements to help
those brand owners who need to make significant changes."
The changes follow a systems audit of New Zealand infant
formula manufacturing facilities by Chinese officials last
Minister for Primary Industries Nathan Guy said 12 out of 13
factories still had "actions they need to undertake" to
become registered to export product into China.
While the regulatory changes have been expected since early
last year, New Zealand Infant Formula Exporters Association
chairman Michael Barnett said there had been a bit of shock
in the industry when the details were announced yesterday.
"MPI [the Ministry for Primary Industries] all the way along
had said this was a systems audit and so people had believed
that it was an audit of MPI's systems," he said.
"But in actual fact it was the start of a process of thinning
down the supply chain into the China market."
Asked how contract manufactured brands would be affected by
the changes, Barnett said: "In the first instance it means
that they are out of the market. And for most of them that's
a serious hit."
But he said the new rules did not mean all brands would be
excluded in the long-term.
"What it does say is there will be some casualties and those
that can afford to re-establish themselves in that market and
afford to invest in technology or invest in a relationship
with a manufacturer will be the ones that survive."
Guy said the new regulations applied to all countries
exporting infant formula into the Chinese market and were
unrelated to Fonterra's botulism false alarm last year.
Domestic baby-milk manufacturers in China also face a raft of
strict new requirements as China pushes to restore consumer
confidence after food safety scares including the 2008
melamine scandal, which killed six babies and affected around
Marco Marinkovich, founder of infant formula exporter
KiwiMilk Nutrition, said he was not concerned about the
changes because he was in the process of building his own
factory in Mt Wellington that was expected to be
up-and-running this year.
"Moving forward, if these changes make things tighter I think
it's fantastic for the New Zealand industry and fantastic for
Chinese babies," Marinkovich said. "If we want to be world
class we should be so far ahead of anyone else that we are
the gold standard."
However, only one out of 13 manufacturing facilities
currently meeting Chinese requirements for registration was
not a good look for New Zealand, he added.
Guy said "most if not all" of the 13 manufacturers were
expected to achieve registration.
"MPI will be working closely with the Chinese to help
complete the registration process for manufacturers as
quickly as possible." Retail-ready infant formula accounted
for around 4 per cent of the $5 billion of dairy products
exported to China last year. Kaye said around 150 infant
formula brands were being exported.
- Christopher Adams of the NZ Herald