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Infant formula companies to gain registration to export to China named

Sutton Group and Gardians, the dairy manufacturers to be acquired by Danone's Nutricia arm, are among infant formula companies to gain registration to export to China under that nation's new food safety regulations.

Nutricia itself gained registration, as did Fonterra Cooperative Group, GMP Pharmaceuticals and Dairy Goat Cooperative (NZ). They represent about 90 percent of New Zealand's infant formula exports to China by volume.

Other companies can be registered after the May 1 deadline although owners of infant formula brands who can't demonstrate a close relationship with a manufacturer may struggle to meet Chinese requirements, Food Safety Minister Nikki Kaye said today.

No price has been disclosed for Nutricia's purchase of Sutton Group, an Auckland-based blending, packing and can-forming company and Gardians, which operates a spray dryer in Balclutha and 18 dairy farms that supply milk and is jointly owned by the Sutton and Patterson families.

China telegraphed its new requirements to the government last week by releasing an audit of a sample of New Zealand manufacturers conducted in March, leaving officials and companies scrambling to interpret the changes in time for today's registration deadline.

According to financial statements lodged with the New Zealand Companies Office Nutricia's local arm recorded $373 million worth of sales in 2012, and delivered a profit of $61 million back to its parent company, Nutricia International.

Infant Nutrition Council chief executive Jan Carey said the manufacturers and brands already registered account for approximately 90% of all New Zealand infant formula exports by volume.
“Today’s announcement confirms that New Zealand manufacturers are able to meet the high test set by the Chinese government.  While some New Zealand producers have yet to be registered, we are confident all manufacturers will meet the new standards in due course.”
Ms Carey said while the overall volume of infant formula exports is unlikely to change, there are likely to be fewer brands sold.
“The Chinese have made it clear they want to reduce the number of brands being offered to consumers and the move to tighten regulations was expected.”

Ms Carey said that it is likely to have an impact on companies or ‘brand owners’ selling formula produced on their behalf.
“In short, the regulations require those selling infant formula to have close links to the manufacturer and in the long run, our industry will benefit from the increased confidence of Chinese consumers.
“While today’s news is positive for manufacturers, for brand owners without a close relationship with the manufacturer the bar is going to be set high, and some will struggle to meet the new rules,” 


Comments and questions

Sad day for New Zealand with only two NZ owned companies/cooperatives approved.The rest now all foreign owned.Talk about bending over.

I understand that not only the manufacturer but the individual brand has to be registered. while the 5 approved might account for 90% of the infant formula exported, are all of the brands they manufacture for approved. If not then the amount of exports impacted will be greater than 90%.

As for Jan Carey comment - 8 of the 13 companies have failed to meet standards set that is not necessarily something to be proud of.

It should not be a surprise that the bigger guys are looked at first.

But what do they mean by "close relationship" to the manufacturer. It is highly likely that most of the smaller brands get their product contract manufactured so how do you get closer to them ? ( GMP mentioned above is a contract manufacturer )

Its standard tactical PRC gamesmanship to firstly allow a business sector or commercial operator to develop and grow business in China, then start to “tighten the screws” on rights and access to gain control. Registration and licencing is the usual path taken. This often arises if the counter party refuses to do soft-dollar deals "under the table” – the process continues until there is no profit in the business opportunity, or the margins are transferred to the Chinese side of the fence on an at least 50% basis. More controls will come once the Chinese milk manufacturer is operating so as to take Fonterra out of the picture and give the Chinese owned side take control of the market. All of this was flagged to Fonterra as well as the Government as it does not have a think-tank. The response was "there is no problem until there is a problem". The real concern is that under the very noses of Government it allows NZ economic reliance on dairy to slowly become exposed. Now that is serious and exhibits there are few "smarts" in Government or the advisers lack Chinese business experience while pulling massive remuneration.