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NZ reputation will bounce back, ANZ's chief China economist says

Tuesday 20th August 2013

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Honest disclosure of the Fonterra infant milk botulism scare will stand New Zealand's reputation as a food producer in good stead in the long run, although the country's reputation for safe food has taken a short term hit, says ANZ Bank's chief economist for Greater China.

Speaking to BusinessDesk in Hong Kong, Li-Gang Liu described the impact of the incident, and the subsequent discovery of raised nitrate levels in lactoferrin produced by Westland Milk, as "a temporary scare."

"Most Chinese consumers still trust the goods provided by New Zealand producers," he said. "I don't think that has changed fundamentally, especially how this case was handled.

"It was reported by the New Zealand side rather than being disclosed by the media or Chinese government inspection. It shows that nobody wants to hide this and the response by Fonterra has been quite swift.

"The fact that the CEO went to China and apologised to Chinese consumers is very different from how an SOE (Chinese state-owned enterprise) or Chinese producer would do. This proactivity has been viewed very positively by Chinese consumers."

His comments came as the Ministers of Primary Industries and Food Safety, Nathan Guy and Nikki Kaye, announced a two-pronged Ministerial inquiry.

The inquiry will focus not only how whey protein powder used in infant formula became contaminated with bacteria capable of producing the potentially fatal disease botulism, but also the quality and robustness of New Zealand's food safety regulations.

Infant formula combines two of the most sensitive issues for Chinese consumers: the health of their children in a society operating a one child policy and food safety, which market research indicates is the single largest issue on Chinese consumers' minds.

Foreign-produced infant formula is heavily favoured by Chinese consumers, with a large grey market operating between Hong Kong and mainland China and evidence of preference for English language over Chinese labelling and premiums paid for formula with labelling showing it was produced for the Australia and New Zealand markets. Restrictions on the number of tins of formula that can be taken into China operate at the border with Hong Kong.

"Demand from China (for infant formula) is huge ... and that demand isn't going to disappear," said Liu, and there were still no reliable domestic brand suppliers in the Chinese market.

"This is a good lesson for everyone that no one should take this market for granted."

Disclosure: ANZ Bank is hosting Pattrick Smellie in Hong Kong.

BusinessDesk.co.nz

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