Christopher Adams

The Business Herald’s markets and banking reporter.

Formula exporters face uncertain future

Photo / Dean Purcell
Photo / Dean Purcell

About 50 New Zealand infant formula companies, which produce roughly 70 brands for export to China, are facing an uncertain future under new Chinese import rules that will require baby milk brands to have "clear control" over the manufacturing process.

The Government revealed this afternoon that around 10 per cent of the $200 million worth of baby milk this country exports to China annually is produced by small-scale players who do not own factories and instead have their products made at contract manufacturing facilities.

New Chinese regulations, which come into force on May 1, will require companies exporting infant formula into China to have "clear control" over the manufacturing process, which could make it difficult for contract manufactured brands to gain registration under the new rules.

Minister for Food Safety Nikki Kaye said about 50 New Zealand companies, producing around 70 infant formula brands, currently had their products produced by contract manufacturers.

Roughly 150 infant formula brands in total were being exported from New Zealand, Kaye said.

Minister for Primary Industries Nathan Guy said there could be some "smaller players" who would not meet the new Chinese requirements.

He said the Ministry would work closely with brands and manufacturers to get as many companies as possible "across the line".

Kaye said Chinese officials had made it clear that they would require a close association between the infant formula brand owners and manufacturers.

"Yesterday they formally advised that in practice that means the brand owner having clear control over the manufacturing process and the product formulation for their brand," said Kaye.

"This will impact on those brand-owners who are unable to prove that close association. MPI will work with those brand-owners to advise them of options that could bring their brands into line with the new regulations."

She said the new import requirements would have "a very significant impact" exporters who are unable to demonstrate a close association.

"Our Embassy in Beijing is seeking transition arrangements to help those brand owners who need to make significant changes."

The new regulations apply to all countries exporting infant formula into the Chinese market.

Domestic baby milk manufacturers in China are also facing a raft of strict new requirements as the Chinese Government pushes to restore consumer confidence following food safety scares including the 2008 melamine scandal, which killed six babies and sickened around 300,000 more.

Guy said the Government expected "most if not all" of New Zealand's 13 infant formula manufacturers to achieve registration, although all but one firm had actions they needed to undertake before registration could be completed.

"MPI has provided details of those changes to the manufacturers this morning and in some cases changes have already been made," he said. "MPI will be working closely with the Chinese to help complete the registration process for manufacturers as quickly as possible."

About 90 per cent of New Zealand's infant formula exports are controlled by manufacturers who are working through the registration process, a statement from Guy and Kayes said.

- NZ Herald

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