The Business Herald’s markets and banking reporter.

Questions remain over 'grey market' Karicare

Fonterra's dairy factory at Te Rapa. Photo / Christine Cornege
Fonterra's dairy factory at Te Rapa. Photo / Christine Cornege

Questions remain over the status of potentially contaminated Karicare infant formula sold through unofficial channels in China, despite Fonterra's assertions that all products affected by its botulism scare have been contained.

Four Countdown supermarkets, as well as Gilmours wholesale stores, are registered to sell infant formula to certified exporters.

The formula usually arrives in China via Hong Kong, which allows traders to circumvent laws that require infant formula for the Chinese market to be manufactured to specific standards.

Karicare made for the New Zealand market does not meet Chinese standards, but is allowed to enter the former British colony. It then passes unofficially into mainland China and is sold online on websites such as Taobao, the Chinese equivalent of Trade Me.

While Nutricia, Karicare's manufacturer, has said all of its products sold through official channels in China are unaffected by the botulism scare, sources say most of the Karicare consumed in that country is sold on the "grey", unofficial market.

In New Zealand, Karicare Stage 1 and Karicare Gold+ Stage 2 Follow On formula products have been recalled.

One infant formula industry source, who did not want to be named, said a large proportion of the Karicare manufactured for New Zealand enters the unofficial market and is consumed in China.

The Herald sent a list of questions about the grey market trade to Nutricia's public relations advisers on Wednesday, including whether the company had been able to account for all of the affected Karicare products that had entered China's unofficial market.

On Wednesday evening a Nutricia spokeswoman said all the representatives of the company who could answer the questions were "working on the issue" and could not be reached.

Yesterday the spokeswoman said a "team" was working on the Herald's enquiry.

"As you can understand our efforts have been concentrated on NZ families and ensuring they have accurate information," she said.

As of Friday morning the questions remain unanswered.

At a press conference on Wednesday Fonterra chief executive Theo Spierings said all products affected by the contamination crisis were "out of the market".

Asked how it had been possible for all of the affected Karicare sold on China's grey market - which is likely to be in the hands of hundreds of online traders - to be contained, Spierings said: "We can only be sure by talking to our customer [Danone, Nutricia's French parent company]. Danone is a world class multi-national."

The industry source said the grey market trade was "a ticking bomb" for Nutricia.

On Monday a Countdown spokeswoman said the supermarket had "no visibility" on the intended destination of infant formula it sold to exporters.

Pamela Munoz, of Alibaba Group, which operates Taobao, said all potentially contaminated product listings had been removed from the online trading platform.

Fonterra revealed at the weekend that a dirty pipe at its Hautapu plant in the Waikato might have contaminated three batches of a whey protein, called WPC80, with a bacteria that can cause botulism, a potentially fatal illness.

A number of the dairy giant's customers, including Danone and Coca-Cola, used WPC80 to make a range of products, including infant formula.

Countries affected include New Zealand, Australia, China, Saudi Arabia and Vietnam.

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