Chinese dairy company Bright Dairy has seen sales slump following accusations that it suppressed news about alleged safety problems with its products, according to the Financial Times.
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The backlash against Bright Dairy, based in Shanghai, is part of a growing trend in China of consumers turning against local and multinational companies that come under attack from the media or government about health safety, the paper said in an article on its website.
KFC, Heinz, Häagen-Dazs, and Nestlé have all come under pressure recently over complaints about their products on safety grounds, and have often seen sales suffer temporarily.
But while western companies have extensive experience of consumer complaints, Bright Dairy, one of Shanghai’s most powerful state businesses, is unused to responding to complaints – let alone admitting errors – about its products.
Bright Dairy is the listed vehicle of the Shanghai Milk Group, owned by the city government. Danone, the French dairy company, owns 7.7% of Bright Dairy, according to the Chinese company’s annual report.
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By GlobalDataBright Dairy equivocated for nearly three weeks before confirming reports last week that it had stored its milk products at a subsidiary in Henan province outside in the hot summer months, because its cool stores were full.
Journalists in Shanghai were warned by the city’s propaganda department, which controls the local media, against writing stories about the controversy, after it was aired on Henan TV, telling them such reports had been banned.
Shanghai suppressed the story but the city could not control the media elsewhere, nor the internet, with devastating results for the company’s business.
Bright Dairy’s sales were down 30% in Guangzhou, 90% in Zhengzhou, the capital of Henan, and 60% in Changchun, in north-east China, according to CCTV, China’s national broadcaster.
Of 200,000 respondents to an online survey by sina.com, China’s largest portal, 80% said they would no longer buy the company’s products, even though more than 70% said they had once trusted the firm.
Concerns over the safety of dairy products have increased since at least 13 babies died in Henan last year after being fed fake infant formula.
A spokesman for Bright Dairy said the company had had problems with management but was now addressing them. “We’ve failed to pay enough attention to sanitation and ensuring our workers had no health certificates,” the spokesman said. “It is also against the rules for us to pile products outside of the cool storage area, so we are having our storage rebuilt.”
Dairy, mainly through ice cream and yoghurt sales, is one of China’s fastest growing food industries, with consumption doubling in the five years to 2004.
With the government encouraging more calcium in diets, demand for milk is expected to continue to grow strongly for many years.
