Abbott and Beingmate Get Involved in "Fake" Milk Powder Scandal in China

Guangzhou, China, April 14, 2016 (Newswire.com) - ​Abbott and Beingmate have got involved in China's latest milk powder counterfeiting scandal. Chaotic sales channels of infant formula should be blamed for such counterfeiting scandals in China, according to analyst CCM.

China Food and Drug Administration confirmed that Abbott and Beingmate got counterfeited in Shanghai fake milk powder case in China last Saturday (Apr. 9). The counterfeit infant formula under brand names of Abbott and Beingmate in China flew into the milk powder market in Henan, Anhui, Jiangsu and Hubei. Currently, the trace of 3,300 cans of fake Abbott is still unknown.

“No supervision on the dealers between the manufacturers and the terminal market should really be blamed for such a scandal,” stated Xu Simin, editor of Dairy Product China News.

“The sale of milk powder in China is different from that in western countries. In China, it is usually the dealers that purchase infant formula from the manufacturers and sell them to different supermarkets or stores,”

“However, the Chinese government only supervises on the qualities of milk powder from the manufacturers and conducts spot checks on the milk powder in supermarkets or stores. Without supervision on dealers between two ends, it is easy for fake milk powder to flow into the market,” said Xu.

The Shanghai fake milk powder case

• 22,600 cans of fake milk powder were produced in total

After investigation by China’s Public Security Bureau, suspects of the production and sale of counterfeit milk powder have been accused and under arrested, according to Yan Zuqiang, director general of Shanghai Municipal Food and Drug Administration (FDA).

The suspects were all experienced in trading infant formula as a dealer and familiar with infant formula production. As of Apr. 9, 22,600 cans of fake milk powder were produced and sold under the brands of US infant formula maker, Abbott, and China infant formula maker, Beingmate. 

In Sep. 9, 2015, Abbott in Shanghai headquarter reported the fake milk powder to Shanghai Public Security Bureau.

After a three months investigation, nine suspects were seized by Shanghai Public Security Bureau in Dec.9 2015 to Jan. 7, 2016. Over 1,000 cans of fake Abbott infant formula, over 20,000 empty steel cans and over 65,000 fake Abbott logos were found and captured.

In March 11, 2016, six arrests have been made over the alleged production and sale of fake milk powder. Over 4,000 cans of fake Abbott milk powder which hadn’t sold into were captured again.

• Faking the milk powder

In Aug. 2014 to May 2015, the suspects purchased the real “Beingmate” milk powder (Love+ Infant Formula (405g)) in paper box in RMB 30/box. They faked the Beingmate steel can in Shandong Jingu Can Maker Co., Ltd. based on the pattern of the real Beingmate paper box. The suspects also produced counterfeit Beingmate infant formula in the factory of the can-maker company and manufactured over 11,000 cans of fake Beingmate infant formula (Love+ Infant Formula (1,000g)).

Later, they sold the fake “Beingmate” to the dealers in Zhengzhou, Henan and Hefei, Anhui in the price of about RMB140/can through an infant formula wholesaler in Chongqing. The total sale amount reached to over RMB 1.6 million.

In Apr. 2015 to Sep. 2015, the suspects again faked the plastic can of Abbott infant formula in Dongguan Lanqi SuJiao Co., Ltd., a plastics manufacturer in Guangdong. They also printed the Abbott infant formula labels in a printing workshop in Taizhou, Zhejiang.

Later, they purchase some infant formula products in the price of RMB70-RMB80/can, such as “Vitacare” and “Karicare”, produced in New Zealand, “Herds” and “Yaolan” produced in China.

Then they used the milk powder to fake 11,600 plastic cans of “Abbott” Similac Infant Formula (900g) and sold them to the same dealers mentioned above and new dealers in Suqian Jiangsu, Wuhan Hubei in the price of about RMB160/can through the same infant formula wholesaler mentioned above. The total sale amount reached to over RMB 1.9 million.

“It is a typical criminal case,” stated Ma Chunliang, team leader of inspection team, State Council Food Safety Office. “The criminal offenders made exorbitant profits by faking infant formula using the milk powder purchased in a low price.”

• Flows of the fake milk powder

The fake milk powder flew to Henan, Anhui, Jiangsu and Hubei, according to Public Security Bureau. However, the traces of 3,300 cans of fake Abbott infant formula are still unknown, according to Ma.

Ma has released the flows of some fake milk powder:

In May 2015, Feng, an infant formula dealer in Wuhan, Hubei had suspicion on whether the infant formula was counterfeit when he found out the obvious differences on the packing between the real Abbott and fake Abbott. Then he destroyed 1,500 cans of fake Abbott infant formula by himself.

In July 2015, Wang, an infant formula dealer in Suqian, Jiangsu destroyed 600 cans of fake Abbott infant formula by himself.

Sun, an infant formula dealer in Anhui, Hefei, destroyed 1,200 cans of fake Abbott infant formula by himself during the time when the case was exposed.

Zhang, an infant formula dealer in Anhui, Hefei, sold 3,600 cans of fake Beingmate infant formula by himself before Aug. 2015.

Along with the 5,000 cans of fake Abbott infant formula were captured by Public Security Bureau, 3,300 cans of fake Abbott infant formula are still left unfound. However, the flows 7,400 cans of fake Beingmate infant formula hasn’t released by the government till the time CCM finished reporting the piece of news.

Responses

• Abbott: didn’t get affected in such a short time

In Apr. 5 2016, Abbott claimed that the first clue of the fake infant formula was found and reported to Shanghai Public Security Bureau by Abbott.

“The quality and safety of Abbott product and the health of our consumers are always the priorities for Abbott,” said Abbott official customer service.

“After finding the fake Abbott infant formula in the market, Abbott immediately reported it to Shanghai Public Security Bureau,”

“All the fake products had been investigated, dealt with and captured in Dec. 2015.”

Besides, the fake infant formulas were found in some small towns and villages in China, according to the official customer service.

Abbott is a listed company in New York Stock Exchange. Abbott has it business in China for nearly 20 years and has set up its China’s headquarter in Shanghai, ten offices, three factories and two R&D centers, according to its official website.

The sales volume of Abbott global nutriments reached to USD1.789 billion in 2015, up 6.5% year on year. Specifically, the sales volume of Abbott infant nutriments increased 9.7% year on year, thanks to the good selling performance of its Eleva serious of infant nutriments promoted in China and some other new products promoted in other countries, according to Abbott third-quarter earnings in 2015.

As for the influences of the fake infant formula case on Abbott China, Abbott claimed that: “We don’t get affected in such a short time and there is no relevant data now.”

• Beingmate: no suspicious products were found

In Apr. 6 2016, Beingmate announced it immediately had inspections on the products from all the sales channels and terminal markets and no suspicious products were found now.

Beingmate also said that it would actively cooperate with the government and the Public Security Bureau to strengthen the inspection on the milk products.

Also, Beingmate suggested the consumers that they should buy Beingmate products from formal channels.

Chaotic sales channels helped to fake the milk powder

The fake milk powder case didn’t have much to do with Abbott own sales channels, according to Song Liang, senior dairy analyst.

“Abbott in China has a quite good distribution system,” said Song. “Nothing would go wrong if the infant formula sold by the traders are imported, manufactured and authorized by Abbott.”

In fact, it is the chaotic sales channels that helped fake the milk powder in the China’s dairy industry. In western countries like Australia, the supermarkets usually purchase the milk powder directly from the manufacturers and no traders are involved, according to Wang Dingmian, former director of Dairy Association of China.

“In China, many milk powder makers set up different sales regions. Besides the regional sales representatives, there are provincial sales representatives, municipal sales representatives,” said Wang.

“The more levels of sales representatives are, the easier milk powders could get into the market.  For example, the manufacturers only sell 10 tonnes in total but 15 tonnes of milk powder are consumed in the market. That’s because there are too many sales representatives and it is difficult for the manufacturers to supervise on al l sales representative,” said Wang.

In long term, the government would be stricter with the supervisions from production to selling, from domestic to abroad, from online sales channels to offline sales channels.

“Especially with the implementation of ‘one brand, one formula’ policy for infant formula in China, a brunch of brands would be eliminated. With fewer brands, it is easier for the manufacturers to supervise the sales channels and the flows of the products,” said Song.

Recommended articles from CCM:

China’s dairy enterprises ready to capture market of special infant formula

China: New Food Safety Law Overshadowed by Fresh Milk Scandal

China: New Infant Formula Policy will Eliminate 80% of Domestic Products

Tag: Abbott, Beingmate

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta.

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing [email protected] or calling +86-20-37616606.

Source: CCM, China Food and Drug Administration