HONG KONG — Six years ago, when tainted infant formula sickened 300,000 babies in China and killed six, one of the biggest foreign investors in the sector was caught by surprise.
The Fonterra Cooperative Group in New Zealand, one of the world’s largest dairy companies, had invested millions of dollars in a partnership with the Sanlu Group, a Chinese infant formula maker that was one of several found to have mixed an industrial chemical into milk powder to artificially boost protein readings.
Sanlu was declared bankrupt, and four of its executives were imprisoned. Fonterra was forced to write down the entirety of its investment of 200 million New Zealand dollars, or about $167 million at the current exchange rate, in the Chinese venture.
Yet on Wednesday, Fonterra became the latest foreign company to make a new bet that it could turn a profit by bringing safer food to China. The company said it would spend more than $500 million in a tie-up with the Beingmate Baby and Child Food Co., a Chinese manufacturer of infant formula. A day earlier, Kohlberg Kravis Roberts, a U.S. private equity giant, announced an investment of about $400 million in China’s largest chicken breeder, Fujian Sunner Development, in a deal aiming to improve food safety and quality.
“China is a completely different environment now; Beingmate is a completely different partner,” Theo Spierings, the chief executive of Fonterra, said Wednesday in response to questions from reporters in Beijing about the Sanlu incident, according to Reuters.
“We are very focused on learning from the past and moving on to the future,” he said.
Food safety scandals occur with disturbing frequency in China. This week, according to state news reports, the authorities seized more than 30,000 tons of chicken feet, a common menu item in China, that had been contaminated by a hydrogen peroxide cleaning agent. And in eastern Zhejiang province, 17 people were in court Monday on charges of selling 38 tons of dog meat — consumed in parts of the country — that had been poisoned when the animals were slaughtered with cyanide or overdoses of anesthetics.
The challenge confronting big foreign food companies in China is how to ensure that their standards are enforced by all workers at all stages of the food supply chain. Here, ignorance can be a more common problem than outright deception, experts say.
“Most of the time it’s not that something is being hidden. It’s more that the people are not aware of the standards that Western companies expect,” said Sébastien Breteau, the chief executive of AsiaInspection.
Breteau’s company conducts spot checks on all kinds of factories in China on behalf of the companies they supply, and among food factories, the failure rate for inspections so far this year is more than 50 percent.
“What I’ve seen when you sit down in a factory and ... train them over more demanding standards in terms of manufacturing, then they catch up with it very quickly,” he said.