Sanlu Group

Infobox Company
name = Sanlu Group
三鹿集团

type = Private
genre =
foundation = Shijiazhuang, China
founder =
location_city = Shijiazhuang, Hebei
location_country = China
location =
locations =
area_served = China
key_people = Zhang Zhenling (Chairman)
industry = Dairy products
products = Milk, baby milk, powdered milk
services =
revenue =
operating_income =
net_income =
assets =
equity =
owner =
num_employees =
parent =
divisions =
subsid =
homepage = http://www.sanlu.com/
footnotes =
intl =

Sanlu Group (zh-cp|c=三鹿集团|p=Sānlù Jítuán, where "Sanlu" literally means "three deers") is a Chinese dairy products company based in Shijiazhuang, the capital city of Hebei Province. The state-owned company is one of the oldest and most popular brands of infant formula in China. [http://news.163.com/08/0911/21/4LJCTVCF0001124J.html Sanlu decides to recall melamine-contaminated product] , news.163.com (11 September 2008) zh icon] Sanlu is 43% owned by New Zealand's Fonterra.

In September 2008, it was involved in an adulterated milk powder scandal, affecting some 53,000 Chinese infants and killing four. [http://www.bloomberg.com/apps/news?pid=20601080&sid=a4krf9ZOzsh8&refer=asia China Milk Scandal Spreads; Hong Kong Girl Sickened"] , Bloomberg (21 September 2008)] Melamine can cause kidney stones and other complications.

Ownership and business

In December 2005, a joint venture agreement was signed which involved New Zealand dairy cooperative Fonterra taking a 43% equity stake in the Chinese dairy [cite web
url=http://www.scoop.co.nz/stories/BU0512/S00032.htm
title=Fonterra And San Lu Reach Joint Venture Agreement
date=2 December 2005
accessdate=2008-09-15
publisher="Scoop"] by injecting ¥864 million. The joint venture company started trading in 2006. [ [http://news.xinhuanet.com/fortune/2005-12/02/content_3866855.htm Fonterra acquires 43% in Sanlu Group, IPO planned] , Xinhua (2 December 2005) zh icon] The majority 56% stake is owned by Shijiazhuang Three Deers Limited (石家庄三鹿有限公司). [ [http://news.xinhuanet.com/local/2008-09/13/content_9971430.htm Government does not own stake in Sanlu; Sanlu Group responsible for cover-up] , Xinhua (3 September 2008) zh icon]

In 2007, its sales reached ¥10 billion [ [http://www.sanlu.com/SanLu.aspx?sortId=1&id=1&Is=0 三鹿简介] ] Milk powder sales of the group ranked number 1 for 15 consecutive years, with a market share of 18 percent. The company prided itself in its stringent quality control procedures, boasting its extremely rigorous tests on its products. "Made in China", a special edition of the CCTV program "Quality Reports Weekly" aired on 2 September 2007 focused on the company, who claimed over 1,000 different tests were carried out before its products leave the factory. [ [http://news.cnfol.com/080912/101,1603,4759687,00.shtml CCTV In-depth report: Sanlu powder undergoes thousand tests before leaving factory] zh icon] [ [http://cache.baidu.com/c?m=9f65cb4a8c8507ed4fece763104a8023584380147d8a8a5268d4e419ce3b46414564e6b92c2116198fc57b6702a94d58ebf3217240427af1c4969c0f80fbc42738f926230068913716c46fdedc4755d656944d98dc0e96b9e742e7b9d3a3c82450dd200f6df0fa9c2d0403ca1ee7653bf4d2ef5f645f07cae6&p=c478c64ad1841dff57ee9e2a5454&user=baidu 央视《每周质量报告》“中国制造”首推三鹿婴幼儿奶粉] zh icon] To that end, on 8 January 2008, it was awarded second prize at the 2007 National Scientific Techniques Awards in the category of 'Innovative infant formula research and other related techniques'. [ [http://www.cyol.net/zqb/content/2008-01/09/content_2025586.htm How Sanlu won the national technology award] , China Youth Online (9 January 2008) zh icon] A number of its products were exempt from government inspection for having passed government quality checks three times in succession.

2008 milk scandal

In September 2008 Sanlu came to international attention due to product concerns regarding its infant milk formula, which was discovered to have been contaminated with melamine, a non-alimentary chemical which causes kidney stones. At least four infants have died so far [http://news.xinhuanet.com/english/2008-09/18/content_10075004.htm Death toll rises to four in tainted baby formula scandal in China] , "Xinhua" (18 September 2008)] and excess of 56,200 babies have been made ill, with many said to be "in serious condition". [cite news
url=http://news.bbc.co.uk/2/hi/asia-pacific/7620253.stm
title=Chinese Baby Formula Scandal Widens as 3 Deaths Are Announced
publisher="BBC"
date=17 September 2008
accessdate=2008-09-16] .The dairy management is thought to have been aware of the problem since June 2008, according to company sales representativesRaymond Li, "Censorship hammer comes down over scandal", Page A5, "South China Morning Post" (16 September 2008)] . However, ministry of Health officials said that Sanlu had begun to receive customer complaints as early as March 2008Kristine Kwok, "Officials knew of tainted milk for a month", Page A4, "South China Morning Post" (17 September 2008)] . The Xinhua News Agency, meanwhile, reports that Sanlu received its first complaints about baby milk in December 2007. [ [http://www.timesonline.co.uk/tol/news/world/asia/article4807667.ece "China launches crack-down on export milk", Timesonline] ] [http://www.telegraph.co.uk/news/worldnews/asia/china/3070567/The-poisoning-of-Chinas-babies.html "The poisoning of China's babies", Telegraph] ] One customer, Wang Yuanping, told Sanlu of problems with his child's urine in May 2008. After writing an internet post about the problem, Sanlu offered him £200 of free milk to remove it. He complied and distributed it to friends.

Fonterra was alerted to the contamination on 2 August. There was an immediate trade recall, but Fonterra said that local administrators refused an official recallKlaudia Lee, "NZ alerted China to tainted milk, PM says", Page A1, "South China Morning Post" (16 September 2008)] . Fonterra notified the New Zealand government on 5 September. Three days later, Prime Minister, Helen Clark had Beijing officials alerted directly. [cite web|url=http://news.bbc.co.uk/2/hi/asia-pacific/7616346.stm|title=Toxic milk toll rockets in China |date=15 September 2008 |publisher=BBC News|accessdate=2008-09-18] Clark said: "I think the first inclination was to try and put a towel over it and deal with it without an official recall." [Jane Macartney & Sophie Yu, [http://www.timesonline.co.uk/tol/news/world/asia/article4758549.ece Chinese milk powder contaminated with melamine sickens 1,253 babies] , "The Times" (16 September 2008)]

On 15 September, the company issued a public apology for the contaminated milk powder; Sanlu was ordered to halt production, and to destroy all unsold and recalled products. Authorities reportedly seized 2,176 tons of milk powder in Sanlu's warehouses. An estimated 8,218 tons of product had been recalled, and another 700 tons was on its way back to Shijiazhuang"Xinhua", [http://news.xinhuanet.com/english/2008-09/15/content_10008205.htm "China to destroy 10,000 tons of tainted baby formula"] , chinaview.cn (15 September 2008)] .

After testing samples from 491 batches of products sold by all 109 companies producing baby milk powder, the National Administration of Quality Supervision, Inspection and Quarantine said that all 11 samples from Sanlu failed the melamine test."Xinhua", [http://news.xinhuanet.com/english/2008-09/17/content_10046949.htm "China seizes 22 companies with contaminated baby milk powder"] , chinaview.cn (16 September 2008)] Klaudia Lee, "Tests find tainted baby milk at 21 more firms", Page A1, "South China Morning Post" (17 September 2008)] Sanlu, whose products sell at half the price of equivalents on the market,Lee Spears, [http://www.bloomberg.com/apps/news?pid=20601080&sid=a1rfKvOp3xwc&refer=asia, "China Revokes `Inspection-Free' Right as Milk Scandal Spreads"] , Bloomberg (18 September 2008)] recorded the highest levels of contamination among all the samples tested, at 2,563 ppm. [http://news.cctv.com/china/20080916/107375.shtml Administration of Quality Supervision, Inspection and Quarantine announces list of enterprises involved in Melamine milk] , China Central Television (16 September 2008)]

Tian Wenhua (田文華), Chairman and General Manager of Sanlu and Party Secretary was stripped of her party and functional posts during an extraordinary meeting of the Hebei provincial standing committee of the Communist Party of China; four Shijiazhuang officials, including vice mayor in charge of food and agriculture, Zhang Fawang, were reportedly removed from office.Klaudia Lee, "Tests find tainted baby milk at 21 more firms", Page A1, "South China Morning Post" (17 September 2008)] "Xinhua", [http://news.xinhuanet.com/english/2008-09/17/content_10046973.htm "Officials, company manager sacked following baby milk powder scandal"] , chinaview.cn (16 September 2008)] [Lee Spears, [http://www.bloomberg.com/apps/news?pid=20601080&sid=a1rfKvOp3xwc&refer=asia China Revokes `Inspection-Free' Right as Milk Scandal Spreads] , Bloomberg, (17 September 2008)] Mayor Ji Chuntang reportedly resigned on 17 September; Tian was charged under Articles 144 and 150 of the criminal code. [ [http://news.hebei.com.cn/system/2008/09/17/010106460.shtml MD of Sanlu detained for criminal charges] , Hebei.com (17 September 2008) zh icon]

Since Sanlu, the region's largest purchaser of milk, was ordered to halt production, farmers in Hebei are suffering hardship because of the lack of purchasers for their milk. Many are said to be contemplating selling their cows into a buyers' market.Gillian Wong, [http://ap.google.com/article/ALeqM5jLXpq9YQBdZkaSRyRtY6IE57xcIQD93BGRF80 China's dairy farmers fret as milk scandal grows] , Associated Press (22 September 2008)] On 24 September 2008, Fonterra announced that it had written down the carrying value of its investment by NZ$139 million (two-thirds), reflecting the costs of product recall and the impairment of the 'Sanlu' brand "as a direct consequence of the criminal contamination of milk in China". TheCompany CEO believed that perhaps some of the company assets might still be of some value.cite web|url=http://www.businessday.co.nz/industries/4704082|title=Fonterra takes 69pc SanLu writedown|author= Michael Field & Andrew Janes |publisher= "Business Day" (Fairfax Media) |date=24 September 2008 |accessdate=2008-09-25] [cite web
date=24 September 2008
url=http://www.stuff.co.nz/4704077a13.html
title=China scandal hits Fonterra hard
publisher="Stuff" (Fairfax Media)
accessdate=2008-09-24] Chairman Henry van der Heyden said that the contamination was a criminal act which Fonterra could not have prevented. On 26 September 2008, Fonterra CEO denied that Fonterra is selling its stake of 43% of Shijiazhuang Sanlu Group Co. [cite web|url=http://online.wsj.com/article/SB122242110717678549.html|title=Fonterra: Not Contacted About Sanlu Stake Sale By JASON LEOW|accessdate=2008-09-25] On 27 September 2008 China Economic Net reported that Sanlu may have been bankrupted and soon be taken over by Beiijng Sanyuan Food Company Ltd.. A Sanyuan source confirmed the company's acquisition plans.cite web|url=http://en.ce.cn/Business/Enterprise/200809/27/t20080927_16935772.shtml|title=Sanyuan may take over tainted milk brand Sanlu|work=China Daily|date=26 September 2008]

ee also

*Food safety in the People's Republic of China
*Chinese protein export contamination

References

External links

* [http://www.sanlu.com/ Official website of Sanlu Group]