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Chinese Dairy Still Feeling Effects of Melamine

15 June 2009

CHINA - China's dairy sector is struggling to claw its way back from the debilitating effects of last year's tainted milk scandal that saw one producer go bankrupt, losses at several others and an industry reputation in tatters.

The melamine-tainted milk scam claimed the lives of six infants and hospitalized nearly 300,000 others in 2008. The incident forced dairy firms to take their products off the shelves and go into damage control mode, chiefly by way of crisis marketing and quality control.

The industry, which had witnessed a 20 per cent growth rate over the past decade, also reported deep losses.

Industry leader Mengniu, for the first time in several years, posted a loss of 948.6 million yuan in 2008, despite strong sales during the first three quarters of the year.

Yili incurred losses of 1.69 billion yuan; Bright Dairy lost 286 million yuan.

Only Sanyuan Food, one of the few producers to escape the crisis, made a profit of 40.76 million yuan in 2008.

Investors too shunned the industry. Yili and Mengniu shares nose-dived. Yili dropped to 6 yuan from 17 yuan, while Mengniu fell to HK$6.4 from HK$24 last August. Bright Dairy shares went down to 3.2 yuan last December from 7.6 yuan in September 2008.

And, in February this year, Sanlu, which was at the heart of the scandal, declared bankruptcy, leaving a dairy market worth 10 billion yuan for other players to grab.

TheCattleSite News Desk



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