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Oct 8, 2008
TAINTED MILK SCANDAL
Crisis to cost billions
Affected companies try to woo back customers even as milk product sales plunge
SHANGHAI: China's milk crisis will likely cost billions of dollars and disrupt millions of livelihoods, and it could be a year before consumer confidence in dairy companies is restored, experts say.

Meanwhile, China declined to release updated figures revealing how many children have been affected by the tainted milk scandal, as it attempted to boost confidence in its food safety standards.

Chinese officials are anxious to draw a line under the scandal that killed four infants and made more than 53,000 children fall sick with melamine, a chemical used to make plastic, that was found in milk from leading dairies.

State media said at the weekend that samples from 31 brands of baby formula contained no trace of the chemical. Similarly, samples from hundreds of batches of liquid and powdered milk were also melamine-free.

In Shanghai, hip hop music blasted from a stage next to a giant inflatable cow as Guangming (Bright) Dairy - one of more than 20 companies whose milk was tainted with melamine - tried to woo back milk drinkers. In southern Shenzhen, dairy firms Mengniu and Yili offered competing 'buy one, get one free' promotions on crates of milk.

But despite the fanfare, consumers are likely to remain cautious and a number of countries around the world have banned or restricted imports of Chinese milk products. It could take up to a year to repair the public's damaged faith, experts agreed. Meanwhile, the economic costs are mounting.

No official estimate has been released of how much the crisis has cost China's dairy industry.

Companies whose products were contaminated saw sales plunge 60 to 70 per cent last month from a year earlier, said Mr Lao Bing, an analyst with Shanghai-based Mental Marketing Dairy Consulting. Dairy sales for the full year are likely to be 20 per cent lower than the 160 billion yuan (S$34.3 billion) posted last year, said Mr Lao, whose firm advises leading Chinese dairy brands.

About three million workers, mostly connected to the small dairy producers who account for 80 per cent of China's milk production, were affected, said Mr Chen Lianfang, an analyst from Beijing-based Orient Agribusiness Consultant.

Mr Bram Wouters, who is leading a project at Wageningen University in the Netherlands to help China improve milk quality, estimated it could take from weeks to a year to establish quality control along the chain linking farmers to consumers.

'In China, things can move fairly fast. It could be that quality control on this issue is exercised fairly quickly and put in place. It has a lot of attention at the moment,' he said.

As China's dairy industry flounders, the latest number of cases believed to have been left ill by the crisis has been kept under wraps. The Health Ministry said it had new statistics but did not release the data and gave no indication if or when it would make the latest information public.

'We've not released the latest number of cases because it is not an infectious disease, so it's not absolutely necessary for us to announce it to the public,' a health ministry spokesman said.

The World Health Organisation in Beijing said it had not been informed of the updated data.

AGENCE FRANCE-PRESSE

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