1、1Government Tightens Rules on Unruly Baby-Formula MarketShopping for baby-milk powder at a Chinese super- market can require considerable effort when the aisle with infant formula is jam-packed with a bewildering array of products. The country has about 2，000 infant formulas， produced by more than 1
2、00 companies. Now the China Food and Drug Administration （CFDA） is trying to consolidate and help tame the unruly market with a new set of regulations. Under rules that go into effect Oct. 1， every infantformula manufacturer domestic and foreign must register each of their products with the CFDA and
3、 produce no more than nine formulas under up to three brands. If a company produces more than one formula for an age group， it is required to explain the difference between the two products. The companies also must clarify where the ingredients were sourced， instead of using vague language such as “
4、sourced from overseas pastures，“ as is now common. Businesses are also banned from suggesting that their 2products could treat diseases， enhance intelligence or boost the immune system. Chinas baby-milk-powder market has nearly doubled in the past five years and will reach about 97 billion yuan （$14
5、.5 billion） by the end of this year， according to internet data provider Analysys. But one side effect has been an “overflow“ of infant formulas in the market， in the words of the food regulator. Many domestic companies adopt a multibranding strategy to manufacture a variety of similar products base
6、d on just one recipe， the CFDA said in June. Although no recent scandal has been linked to the proliferation of brands， a market with an excess of products “bears food-safety risks and makes it difficult for consumers to make a choice，“ the regulator added. In the past， the countrys infant formula i
7、ndustry has been beset by a string of food safety scandals. The worst came in 2008， when six children died and hundreds of thousands of others were sickened after drinking formula contaminated with melamine， a chemical that had been added to the diluted milk to help it pass protein tests. As a resul
8、t， distrust in the domestic dairy industry has 3propelled customers to choose more-expensive foreign brands over domestic products. Chinas imports of infant formula tripled to 176，000 metric tons in the past five years， according to data from the General Administration of Quality Supervision， Inspec
9、tion and Quarantine， the countrys quality watchdog. Now， four of the top five suppliers of milk sellers in China are foreign companies， with Swiss transnational food and drink company Nestle leading the pack at 15 percent share of the market， followed by Danone and Mead Johnson Nutrition， according
10、to London-based Euromonitor International. The only Chinese company in the top five is Inner Mongolia Yili Industrial Group Co. Ltd.， which ranked fourth with a 6.3 percent share of the market. While the new milk-industry regulations target both Chinese and overseas companies， analysts said they wil
11、l mostly affect domestic companies， with which the practice of multibranding is more common. Companies that violate the rules will be fined 10，000 yuan to 30，000 yuan， the regulations said. Companies that violate the law face harsher penalties. Since the policies were announced in June， only a few c
12、ompanies have taken action to reduce the number of their 4brands and formulas. For example， Feihe， a domestic producer based in the northeastern province of Heilongjiang， has cut two brands. A spokesperson at Nasdaq-listed Synutra International Inc. which has nearly 200 formulas， according to the co
13、mpanys website said it has not decided which brands to drop. But a person with knowledge of the matter said the company has started to abandon some subsidiaries， most of which once made baby-milk powder for better-known companies. Getting rid of these OEMs will not have a big impact on Synutra becau
14、se these subsidiaries contributed a minor fraction of the companys revenue， the source said. Partly due to a loophole in the rules， analysts have different predictions about how many businesses will be affected by the policy ranging from around 50 percent to three-quarters of existing businesses. Th
15、ere is “an uncertainty factor about the new policy，“ said Song Liang， an independent industry analyst. Although the new regulations are seen as the “toughest“ measure yet to squeeze out less competitive businesses， Song points out that big companies can avoid it by creating subsidiaries to make diff
16、erent formulas. For example， Yashili 5International Group Ltd.， a unit of domestic dairy conglomerate China Mengniu Dairy Co.， bought Danones Dumex China in December and created a separate subsidiary for the brand. In the wake of the 2008 infant-formula scandal， the Chinese government adopted a seri
17、es of measures to consolidate the fragmented market， with an ultimate goal to invigorate the domestic infant-formula industry. Unlike in countries such as the U.S. where the top three makers have a market share of more than 90 percent， the five market leaders in China have a combined share of less t
18、han 45 percent， according to Euromonitor International. In a joint statement issued by four government departments in 2014， the central government said it planned to form 10 large domestic milk-powder groups with annual revenue of more than 2 billion yuan each by the end of 2015. Zhang Jun， an offic
19、ial at the Ministry of Industry and Information Technology， said in June that the government has achieved the goal. However， these 10 still lag behind the top foreign milk producers. Now the nation has moved on to the next stage to create three to five large milk-powder groups with annual revenue of
20、 more than 5 billion yuan each by the end of 2018， 6Zhang said. Chinese giant turns to France to meet soaring demand for baby formula Chinas third largest baby formula producer opened a vast plant in Frances Brittany region， whose prized dairy cows are set to contribute 100，000 tons of powdered milk
21、 a year to a growing Chinese market that mistrusts domestic production. Synutras 170 million euro （$190 million） factory covers some 38，000 square metres （410，000 square feet） near the small town of Carhaix. The company said it was Chinas largest foreign investment in the milk processing sector. The
22、 factory will be supplied by Sodiaal， Frances biggest dairy cooperative， which has signed a 10 year contract with the Chinese firm. Sodiaal will collect 288 million litres of milk a year from 800 farmers. “No infant milk formula company in the world can produce such quantities，“ Synutra France CEO C
23、hristian Mazuray told journalists at the opening. He said the Carhaix region had been chosen because it was “in the heart of a dairy region known for the exceptional 7quality of its raw materials and for its industrial know-how.“ Frances dairy sector is emerging from a turbulent summer marked by pro
24、tests by farmers demanding higher milk prices. Mazuray said Synutra would pay market rates for its milk， saying the company was more concerned about the quality and traceability of its products than the cost of milk. China has been a major importer of dairy products for 25 years and is now the world
25、s biggest importer of such goods. Since 2000 Beijing has encouraged citizens to drink more milk. This state endorsement， coupled with a contamination scandal that affected 300，000 babies - six of whom died - has encouraged investors to look oversees， including to France， to meet demand. “Since 2008，
26、 the Chinese milk sector has seen repeated health scandals and the Chinese population no longer wants to consume Chinese baby milk，“ explained Gerard Calbrix， an economist at ATLA， an association of French dairy processors. In 2009， domestic milk production in China plunged 20 percent and imports began to soar. Set up in 1998， Synutra， which specialises in upmarket products， employs 12，000 people across the world. 8The addition to the the Brittany plant is set to almost double Syuntras 2014 turnover of 517 million euros to 1.17 billion euros within 12 to 18 months.
