Bloomberg News

Chinese Police Detain Distributor in Hero Milk Powder Probe

March 29, 2013

Chinese police detained a milk distributor suspected of repackaging and selling milk powder made by Swiss dairy company Hero Group that wasn’t licensed for sale domestically, the official Xinhua News Agency said.

The suspect was in charge of a Suzhou, eastern China-based company distributing Hero-branded products, Xinhua said yesterday. Of the 17 batches of milk powder confiscated from the distributor, only three were qualified for sale in China, the agency said, without being more specific.

Shanghai had asked 15 supermarkets and 28 stores selling Hero’s Nutradefense formula to remove the products after the state television broadcaster reported food quality problems, the city’s food safety commission said in a statement March 28. Lenzburg, Switzerland-based Hero said in a statement on its website yesterday it hasn’t detected any quality or safety problems with its products.

Hero’s experience mirrors incidents that affected other overseas brands as China strengthens scrutiny on foreign companies ranging from iPhone maker Apple Inc. (AAPL:US) to Volkswagen AG. (VOW) New leadership takes over this month in a once-in-a-decade change and Premier Li Keqiang pledged on March 17 to improve consumer safety by regulating food quality and environmental protection with an “iron fist.”

Yum, Audi

Yum! Brands Inc. (YUM:US) Vice Chairman Sam Su earlier this year apologized after Shanghai’s food safety commission found excessive levels of antibiotics in samples from a local chicken supplier between 2010 and 2011. Inspection processes and internal communications were lacking, said Su, who’s also chairman of the Louisville, Kentucky-based restaurant chain’s China business.

Last year, Volkswagen’s luxury Audi unit asked a Chinese dealer to remove a banner advocating the murder of Japanese people after a photograph of the sign spread on the Internet amid escalating tensions between the two countries over disputed islands. The message didn’t reflect Audi’s views, Lu Minjie, a spokeswoman at FAW-Volkswagen Automotive Co. said in September.

The Shanghai Food and Drug Administration is conducting a “through investigation” into Hero’s milk powder, the agency said in the statement on its website dated March 28. Any offenders would be “severely dealt with,” it said.

Netherlands Made

Hero said its infant formula sold in China is produced exclusively in the Netherlands and it hasn’t detected quality or safety violations. CCTV in a March 29 report said samples of Hero’s Nutradefense branded formula had altered expiration dates and were adulterated with expired milk.

Hero Nutradefense infant formula is suitable for babies between 6 months to 3 years old, and it sells other infant nutrition brands such as Hero Baby, Friso, and Semper, globally, according to the company’s website.

The Swiss dairy company said in the statement a recent investigation by the Suzhou Institute of Supervision & Inspection on Product Quality alleged that one of Hero’s sub- distributors in China had been involved in the illegal repackaging of Nutradefense. This has been investigated by Suzhou authorities and dealt with appropriately, it said.

Apple and Volkswagen were featured in government-run China Central Television’s annual consumer rights show in the country on March 15.

Apple Criticism

Apple has also come under criticism in China since CCTV’s annual consumer rights telecast two weeks ago found issues related to its after-sales service. The People’s Daily, a newspaper published by China’s Communist Party, has run articles critical of Apple every day this week.

In yesterday’s People’s Daily, the newspaper said the State Administration for Industry and Commerce urged strengthening regulation of contracts between consumers and electronics makers.

Apple policies on returns and repairs in China “fully comply with the local laws and regulations,” according to a Chinese-language statement that the company posted to consumers on its website last weekend.

Volkswagen, Europe’s largest automaker, said March 16 it plans to recall vehicles in China after drawing scrutiny from the nation’s quality inspector and state broadcaster over defective gearbox systems.

Chinese owners of Volkswagen vehicles fitted with its direct-shift gearbox technology -- a system with two gearboxes that help enhance gear changes and improve fuel economy -- have reported abnormal vibrations, loss of power and sudden acceleration, according to CCTV’s report.

To contact the reporter on this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net


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