Foreign milk powder makers in China are set to cement their dominant market position as a result of a widening scandal involving contaminated powder made by leading domestic dairy groups.
Four children have died from drinking milk powder laced with melamine, a toxic substance banned in food that can make protein levels appear higher than they are.
The scandal will definitely hurt local producers as consumers shun domestic dairy products, said Luo Le, an analyst with Roth Capital Partners in Shanghai.
“It’s a big blow to people’s confidence in local dairy products,” Luo said.
Yili Industrial Group Co (伊利), a Beijing Olympic Games sponsor, also faces a recall in Hong Kong, where authorities found eight of its 30 products, including ice cream and yogurt ice bars, contained melamine.
China’s overall dairy market is expected to be worth US$20 billion by 2010, a projection by McKinsey found.
MeadJohnson Nutritionals, a unit of Bristol-Myers Squibb, is the leader in the high-end infant formula market with a 25 percent share.
Wyeth and Dumex, the powdered-milk unit of France’s Danone, have 20 percent and 12 percent of the market, respectively, market research firm CTR in Beijing reported.
Most overseas milk powder companies with operations in China assured the public that their products were free of melamine.
They also promised not to raise prices to take advantage of their domestic rivals’ troubles.
Some Chinese customers have accused MeadJohnson Nutritionals of taking advantage of the crisis by raising prices, but the firm said the launch of a new, higher-priced product happened to coincide with the melamine scare.
MeadJohnson started selling a new powdered milk with enhanced formula on Sept. 11, the same day that the first death because of tainted milk powder was reported, a company official said.
“We did not raise the price of our old products. Currently, we have both old and new products on the shelf,” she said.
Other foreign food companies have made similar price pledges, Xinhua news agency reported.
In related news, two-thirds of China’s Starbucks outlets stopped serving milk yesterday after one of its main suppliers was linked to a the scandal.
Milk products from Starbucks’ supplier Mengniu (蒙牛), as well as Yili and Guangming (光明), were recalled around China yesterday after authorities said they found traces of melamine, a chemical used in plastics, in them.
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