Warc Blog

Insurance allays China's food scares

26 August 2014
BEIJING: As Heinz becomes the latest brand to face a food safety issue in China, recalling an infant cereal after concerns regarding the levels of lead it contained, one innovative retailer is offering an insurance policy to help reassure worried shoppers.

Suning Commerce Group, which owns the Redbaby chain of stores, has moved to address its clientele's fears by offering insurance to customers who buy infant milk powder.

The insurance is being given away for free with the first 40,000 cans of baby formula sold. After that, customers can buy it online.

The policy stipulates that if a brand of milk powder is recalled, customers who bought cans from any Redbaby store, or its ecommerce site, will be paid up to 2,000 yuan ($325) per can, with payments capped at 100,000 yuan.

This particular concern dates back to 2008, when formula milk powder was found to be contaminated with melamine. At least six infants died as a result of consuming the adulterated product, and thousands more were hospitalised.

Part of the problem food manufacturers face is that the country does not possess the facilities to chart the progress of food from farm to fork.

"Standardised traceability of food products does not currently exist in China," David Mahon, of investment firm Mahon China, told the China Daily. "It's a long way from it."

Where other markets have developed a system based on barcodes - which record details of farm of origin, storage and shipment - the high cost of implementing this across China's scattered supply chain of small farms has limited its uptake.

And the fragmented nature of this chain means that even when a manufacturer thinks it is in control of the situation, there is still scope for error, if, for example, a supplier decides to top up its harvest with the help of an unaudited neighbour.

"When supply chains are so large, you can't always prevent a supplier buying from someone else if someone else has a cheaper price," according to a former industry executive. "It's a matter of one guy doing things wrong and the product is contaminated."


Data sourced for China Daily; additional content by Warc staff

 
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