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How Nestlé Finds Clean Milk in China

A dairy farmer moves buckets of raw milk at a Nestle SA milk collection center in Shuangcheng, Heilongjiang Province, China, on Jan. 11, 2012
A dairy farmer moves buckets of raw milk at a Nestle SA milk collection center in Shuangcheng, Heilongjiang Province, China, on Jan. 11, 2012Photograph by Nelson Ching/Bloomberg

Exploding watermelons, toxic peanuts, and contaminated rice are just some of the food hazards that routinely bedevil Chinese consumers. The risks of contamination are particularly far-reaching in the case of milk, since more than 70 percent of Chinese mothers rely on baby formula rather than breast milk to feed their babies. Longstanding concerns regarding unsafe milk in China came to a head in late 2008, when the Chinese authorities accused more than 20 domestic producers of selling milk adulterated with melamine. Six infants died and more than 50,000 babies were hospitalized. In 2011, regulators closed more than 400 dairy farms for violating sanitation and certification standards.

Growing numbers of Chinese families have responded by shunning domestic infant formula in favor of imported brands. That’s creating challenges for both local and multinational companies selling dairy products in China. The country’s largest dairy producer, China Mengniu Dairy, on June 18 announced a HK$12.5 billion ($1.6 billion) deal to buy Yashili International, a local infant-formula maker. The deal makes sense because “the government is trying to consolidate the industy,” Guosen Securities analyst Todd Yang told Bloomberg News. The goal is to “better monitor both upstream and downstream food quality.”