While China’s melamine milk scandal has been covered pretty well by the media, we tend to forget Sanlu’s foreign partner Fonterra, warns retail-expert Paul French of Access Asia in his weekly newsletter.
“But what is interesting to us, is that the New Zealand dairy company Fonterra, which owns 43% of Sanlu, has not been covered in such depth. Surely Fonterra’s involvement in the Sanlu disaster must rank as the biggest scandal affecting a foreign company in China ever – certainly in recent memory. Fonterra is the biggest exporter of milk in the world, not some small-scale operator, so to claim ignorance should surely be viewed as a claim to negligence from such a large and experienced business. As far as can be worked out, Fonterra knew something was wrong. They decided to try and deal with the problem internally, worried about the negative effect on Sanlu, on China during the Olympics and of course on themselves. In China business-speak, they did not want the domestic company they were tied to, or the government of the country they were operating in, to lose ‘face’. Eventually, the New Zealand government had to step in and blow the whistle. Fonterra does not look good to say the least.”
Paul French is a prolific castigator of foreign companies playing dumb in China. The concept of “face” has here gone in the way of the New-Zealand company, where it should have acted, fast, after discovering the scandal.