By Rebecca Howard
WELLINGTON, New Zealand--New Zealand dairy firms are gradually
being allowed to sell baby formula in China again following a
clampdown that saw hundreds of brands shut out of the market
earlier this year.
a2 Milk Company Ltd., which specializes in products for people
with difficulties digesting milk, was the latest to win clearance
from Beijing, the company said Tuesday.
New Zealand's biggest dairy producer, Fonterra Co-Operative
Group, won approval to return in May, and another local company,
New Zealand New Milk Ltd., was let back in earlier this month.
Among the other suppliers to have been approved to sell baby
formula in China again are Nutricia Ltd., Westland Co-Operative
Dairy Company Ltd., Canpac International Ltd., Gardians Ltd.,
Sutton Group Ltd., Dairy Goat Co-Operative (N.Z.) Ltd. and GMP
Dairy Ltd.
Under new rules imposed May 1, offshore infant-formula makers
must register with Chinese regulators before being able to export
their products to the country.
The rules require any company exporting baby formula to have
control over the entire manufacturing process--meaning if they
outsource production they must maintain strong oversight.
The new regulations came after a spate of food-safety scandals
that caused alarm among Chinese authorities.
Last August, Fonterra believed it may have discovered a
potentially deadly bacterium in some of its products, setting off a
recall across Asia that ultimately proved unnecessary, yet harmed
New Zealand's reputation as a safe supplier of food.
Five years earlier, Chinese-made formula tainted with the
industrial chemical melamine killed six infants and sickened
300,000. With demand for infant formula surging as the country's
middle class grows, the call for tougher regulation gathered
pace.
a2 Milk's shares got a strong lift from news of its approval,
gaining 6.6% on the day, while the benchmark NZX-50 gained
0.1%.
A spokesman said the company had enough baby-formula stocks in
China to meet demand until its processing-and
manufacturing-partner, Synlait Milk, also gets the green light from
China.
James Bascand, an analyst at New Zealand investment firm Forsyth
Barr, said a2 Milk was one of fewer than 100 brands so far to win
regulatory approval from Beijing, compared with as many as 800 who
were exporting to China prior to the new regulation.
Dairy represents around a third of New Zealand's exports. The
country has benefited from strong dairy prices in recent years as
demand grows in China for milk products including cheese, butter
and yoghurt.
Dairy exports to China, its biggest trading partner, were last
year valued at 5 billion New Zealand dollars (US$4.33 billion), of
which NZ$200 million was infant formula.
Write to Rebecca Howard at rebecca.howard@wsj.com
