Sanlu Group
Encyclopedia
Sanlu Group was a state-owned Chinese
dairy products company based in Shijiazhuang
, the capital city of Hebei
Province. It was one of the oldest and most popular brands of infant formula
in China. New Zealand
's Fonterra
owned 43% of Sanlu.
In September 2008, it was involved in an adulterated milk powder scandal
, affecting some 294,000 Chinese infants and killing six. Their baby milk powder had been tainted with melamine
, which can cause kidney stones and other complications. It received a bankruptcy
order from Shijiazhuang Court on 24 December 2008, and several of its top managers were sentenced to long prison terms.
.
In December 2005, a joint venture agreement was signed which involved New Zealand
dairy cooperative Fonterra
taking a 43% equity stake in the Chinese dairy by injecting ¥
864 million. The joint venture company started trading in 2006. The majority 56% stake is owned by Shijiazhuang Three Deers Limited (石家庄三鹿有限公司).
with annual capacity of 200,000 tons of formula milk powder. At the time of signing the joint venture contract with Fonterra, the company declared it would invest 3 billion yuan for external growth, with the aim of forming a national industrial network over the next three years. In April 2006, Sanlu acquired a liquid milk production base in Weifang
, Shandong
capable of producing 300,000 tons of liquid milk every year, at an outlay of 400 million yuan. In October of the same year, the company invested production facility with capacity of 100,000 tons of lactic acid bacteria drink and yoghurt in Xinxiang
, Henan
at a cost of 120 million yuan.
In 2007, its sales reached ¥10 billion. Milk powder sales of the group ranked number 1 for 15 consecutive years, with a market share of 18 percent. The company prided itself in its stringent quality control procedures, boasting its extremely rigorous tests on its products. "Made in China", a special edition of the CCTV program "Quality Reports Weekly" aired on 2 September 2007 focused on the company, who claimed over 1,000 different tests were carried out before its products leave the factory. To that end, on 8 January 2008, it was awarded second prize at the 2007 National Scientific Techniques Awards in the category of 'Innovative infant formula research and other related techniques'. A number of its products were exempt from government inspection for having passed government quality checks three times in succession. Sanlu is one of the largest employers in Shijiazhuang
, with close to 10,000 people on its payroll.
, a non-alimentary chemical which causes kidney stones. An estimated 300,000 babies became ill, and six cases resulted in death..
The Xinhua News Agency
reported that Sanlu received its first complaints about baby milk in December 2007. Fonterra
was alerted to the contamination on 2 August. There was an immediate trade recall, but Fonterra said that local administrators refused an official recall. Fonterra notified the New Zealand government on 5 September. Three days later, Prime Minister
, Helen Clark
had Beijing officials alerted directly. Clark accused the company and officials of covering up to avoid an official recall.
On 15 September, the company issued a public apology for the contaminated milk powder; Sanlu was ordered to halt production, and to destroy all unsold and recalled products. Authorities reportedly seized 10,000 tons of product.
After testing samples from 491 batches of products sold by all 109 companies producing baby milk powder, the National Administration of Quality Supervision, Inspection and Quarantine said that all 11 samples from Sanlu failed the melamine test. Sanlu, whose products sell at half the price of equivalents on the market, recorded the highest levels of contamination among all the samples tested
, at 2,563 ppm.
Tian Wenhua (田文華), Chairman and General Manager of Sanlu and Party Secretary was stripped of her party and functional posts during an extraordinary meeting of the Hebei
provincial standing committee of the Communist Party of China
; four Shijiazhuang officials, including vice mayor in charge of food and agriculture, Zhang Fawang, were reportedly removed from office. Mayor Ji Chuntang reportedly resigned on 17 September; Tian was charged under Articles 144 and 150 of the criminal code.
Since Sanlu, the region's largest purchaser of milk, was ordered to halt production, throwing many small dairy farmers into hardship. On 24 September, Fonterra announced that it had written down the carrying value of its investment by NZ$139 million (two-thirds), reflecting the costs of product recall and the impairment of the 'Sanlu' brand "as a direct consequence of the criminal contamination of milk in China". Chairman Henry van der Heyden said that the contamination was a criminal act which Fonterra could not have prevented. On 26 September, Fonterra CEO denied that Fonterra is selling its stake of 43% of Shijiazhuang Sanlu Group Co.
plants, and plants in Tangshan
, Shandong
and Henan
, and would assume some of Sanlu's debt. Consideration was not disclosed, but sum is said to be of the order of ¥ 800 million.
On 19 December, Sanlu secured a loan of ¥902 million to pay medical expenses of and compensation
to children affected by tainted milk powder it produced. It was announced on 25 December that Shijiazhuang court accepted a creditor's bankruptcy
petition against Sanlu, which reportedly had net debt of ¥1.1 billion. Shijiazhuang city, the controlling shareholder, hopes to sell its distribution network as a going concern.
Four Sanlu executives went on trial on 31 December 2008 charged with producing and selling fake or substandard products. Tian Wenhua, former general manager, former deputy general managers Wang Yuliang and Hang Zhiqi, and Wu Jusheng, a former head of Sanlu's milk division appeared in court. Tian pleaded guilty to her role in the scandal, and expressed her remorse, and also called for China to consider embracing the European Union
's standards on melamine. Wang, who had leaped off a building in a suicide attempt, offered his apology and remorse: "When I think of the children who were harmed ... I feel extreme inadequacy towards these sick children and their parents."
On 22 January 2009, Tian was sentenced to life imprisonment
, while other Sanlu executives received sentences of five to fifteen years. Two other men were sentenced to death. Tian was also ordered to pay a fine of 20 million yuan (US$2.9 million). Sanlu was fined 50 million yuan ($7.3 million) despite its bankruptcy.
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
dairy products company based in Shijiazhuang
Shijiazhuang
Shijiazhuang is the capital and largest city of North China's Hebei province. Administratively a prefecture-level city, it is about south of Beijing...
, the capital city of Hebei
Hebei
' is a province of the People's Republic of China in the North China region. Its one-character abbreviation is "" , named after Ji Province, a Han Dynasty province that included what is now southern Hebei...
Province. It was one of the oldest and most popular brands of infant formula
Infant formula
Infant formula is a manufactured food designed and marketed for feeding to babies and infants under 12 months of age, usually prepared for bottle-feeding or cup-feeding from powder or liquid . The U.S...
in China. New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
's Fonterra
Fonterra
Fonterra Co-operative Group Limited is a New Zealand multinational dairy co-operative owned by almost 10,500 New Zealand farmers. The company is responsible for approximately 30% of the world's dairy exports and with revenue exceeding NZ$19.87 billion, is New Zealand's largest company.- History :In...
owned 43% of Sanlu.
In September 2008, it was involved in an adulterated milk powder scandal
2008 Chinese milk scandal
The 2008 Chinese milk scandal was a food safety incident in the People's Republic of China, involving milk and infant formula, and other food materials and components, adulterated with melamine....
, affecting some 294,000 Chinese infants and killing six. Their baby milk powder had been tainted with melamine
Melamine
Melamine is an organic base and a trimer of cyanamide, with a 1,3,5-triazine skeleton. Like cyanamide, it contains 66% nitrogen by mass and, if mixed with resins, has fire retardant properties due to its release of nitrogen gas when burned or charred, and has several other industrial uses....
, which can cause kidney stones and other complications. It received a bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
order from Shijiazhuang Court on 24 December 2008, and several of its top managers were sentenced to long prison terms.
Ownership and business
The company began as Shijiazhuang Dairy Company (SDC). After several acquisitions in 1995, Sanlu Group was formed in 1996. Tian Wenhua, then General Manager of SDC, became President and General Manager of Sanlu. Under Tian, Sanlu led the Chinese powder market for 13 consecutive years in terms of sales. Tian was considered one of the most successful entrepreneurs in China for her role in building the company. She was named deputy chairman of the China Dairy Industry Association (中国乳制品工业协会), and elected to the National Committee of the Chinese People's Political Consultative ConferenceChinese People's Political Consultative Conference
The Chinese People's Political Consultative Conference [], shortened as 人民政协, Rénmín Zhèngxié, i.e. "People's PCC"; or just 政协, Zhèngxié, i.e. "The PCC"), abbreviated CPPCC, is a political advisory body in the People's Republic of China...
.
In December 2005, a joint venture agreement was signed which involved New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
dairy cooperative Fonterra
Fonterra
Fonterra Co-operative Group Limited is a New Zealand multinational dairy co-operative owned by almost 10,500 New Zealand farmers. The company is responsible for approximately 30% of the world's dairy exports and with revenue exceeding NZ$19.87 billion, is New Zealand's largest company.- History :In...
taking a 43% equity stake in the Chinese dairy by injecting ¥
Chinese yuan
The yuan is the base unit of a number of modern Chinese currencies. The yuan is the primary unit of account of the Renminbi.A yuán is also known colloquially as a kuài . One yuán is divided into 10 jiǎo or colloquially máo...
864 million. The joint venture company started trading in 2006. The majority 56% stake is owned by Shijiazhuang Three Deers Limited (石家庄三鹿有限公司).
Expansion
In February 2006, the group opened a dairy plant in TangshanTangshan
"唐山"redirects here. For an alternative name of China, see Names of China#TangTangshan is a largely industrial prefecture-level city in Hebei province, People's Republic of China. It has become known for the 1976 Tangshan earthquake which measured 7.8 on the Richter scale and killed at least...
with annual capacity of 200,000 tons of formula milk powder. At the time of signing the joint venture contract with Fonterra, the company declared it would invest 3 billion yuan for external growth, with the aim of forming a national industrial network over the next three years. In April 2006, Sanlu acquired a liquid milk production base in Weifang
Weifang
Weifang is a prefecture-level city in central Shandong province, People's Republic of China. It borders Dongying to the northwest, Zibo to the west, Linyi to the southwest, Rizhao to the south, Qingdao to the east, and looks out to the Laizhou Bay to the north.-History:Weifang is a historical city...
, Shandong
Shandong
' is a Province located on the eastern coast of the People's Republic of China. Shandong has played a major role in Chinese history from the beginning of Chinese civilization along the lower reaches of the Yellow River and served as a pivotal cultural and religious site for Taoism, Chinese...
capable of producing 300,000 tons of liquid milk every year, at an outlay of 400 million yuan. In October of the same year, the company invested production facility with capacity of 100,000 tons of lactic acid bacteria drink and yoghurt in Xinxiang
Xinxiang
Xinxiang is a prefecture-level city in northern Henan province, People's Republic of China. It borders the provincial capital of Zhengzhou to its southwest, Kaifeng to its southeast, Hebi and Anyang to its north, Jiaozuo to its west, and the provinces of Shanxi and Shandong to its northwest and...
, Henan
Henan
Henan , is a province of the People's Republic of China, located in the central part of the country. Its one-character abbreviation is "豫" , named after Yuzhou , a Han Dynasty state that included parts of Henan...
at a cost of 120 million yuan.
In 2007, its sales reached ¥10 billion. Milk powder sales of the group ranked number 1 for 15 consecutive years, with a market share of 18 percent. The company prided itself in its stringent quality control procedures, boasting its extremely rigorous tests on its products. "Made in China", a special edition of the CCTV program "Quality Reports Weekly" aired on 2 September 2007 focused on the company, who claimed over 1,000 different tests were carried out before its products leave the factory. To that end, on 8 January 2008, it was awarded second prize at the 2007 National Scientific Techniques Awards in the category of 'Innovative infant formula research and other related techniques'. A number of its products were exempt from government inspection for having passed government quality checks three times in succession. Sanlu is one of the largest employers in Shijiazhuang
Shijiazhuang
Shijiazhuang is the capital and largest city of North China's Hebei province. Administratively a prefecture-level city, it is about south of Beijing...
, with close to 10,000 people on its payroll.
Demise
In September 2008, Sanlu came to international attention due to product concerns regarding its infant milk formula, which was discovered to have been contaminated with melamineMelamine
Melamine is an organic base and a trimer of cyanamide, with a 1,3,5-triazine skeleton. Like cyanamide, it contains 66% nitrogen by mass and, if mixed with resins, has fire retardant properties due to its release of nitrogen gas when burned or charred, and has several other industrial uses....
, a non-alimentary chemical which causes kidney stones. An estimated 300,000 babies became ill, and six cases resulted in death..
The Xinhua News Agency
Xinhua News Agency
The Xinhua News Agency is the official press agency of the government of the People's Republic of China and the biggest center for collecting information and press conferences in the PRC. It is the largest news agency in the PRC, ahead of the China News Service...
reported that Sanlu received its first complaints about baby milk in December 2007. Fonterra
Fonterra
Fonterra Co-operative Group Limited is a New Zealand multinational dairy co-operative owned by almost 10,500 New Zealand farmers. The company is responsible for approximately 30% of the world's dairy exports and with revenue exceeding NZ$19.87 billion, is New Zealand's largest company.- History :In...
was alerted to the contamination on 2 August. There was an immediate trade recall, but Fonterra said that local administrators refused an official recall. Fonterra notified the New Zealand government on 5 September. Three days later, Prime Minister
Prime Minister of New Zealand
The Prime Minister of New Zealand is New Zealand's head of government consequent on being the leader of the party or coalition with majority support in the Parliament of New Zealand...
, Helen Clark
Helen Clark
Helen Elizabeth Clark, ONZ is a New Zealand political figure who was the 37th Prime Minister of New Zealand for three consecutive terms from 1999 to 2008...
had Beijing officials alerted directly. Clark accused the company and officials of covering up to avoid an official recall.
On 15 September, the company issued a public apology for the contaminated milk powder; Sanlu was ordered to halt production, and to destroy all unsold and recalled products. Authorities reportedly seized 10,000 tons of product.
After testing samples from 491 batches of products sold by all 109 companies producing baby milk powder, the National Administration of Quality Supervision, Inspection and Quarantine said that all 11 samples from Sanlu failed the melamine test. Sanlu, whose products sell at half the price of equivalents on the market, recorded the highest levels of contamination among all the samples tested
Official test failures of the 2008 Chinese milk scandal
-Tests conducted by AQSIQ:results published on 16 September 2008Source: China Central Televisionresults published on 30 September 2008Source: Administration of Quality Supervision, Inspection and Quarantine...
, at 2,563 ppm.
Tian Wenhua (田文華), Chairman and General Manager of Sanlu and Party Secretary was stripped of her party and functional posts during an extraordinary meeting of the Hebei
Hebei
' is a province of the People's Republic of China in the North China region. Its one-character abbreviation is "" , named after Ji Province, a Han Dynasty province that included what is now southern Hebei...
provincial standing committee of the Communist Party of China
Communist Party of China
The Communist Party of China , also known as the Chinese Communist Party , is the founding and ruling political party of the People's Republic of China...
; four Shijiazhuang officials, including vice mayor in charge of food and agriculture, Zhang Fawang, were reportedly removed from office. Mayor Ji Chuntang reportedly resigned on 17 September; Tian was charged under Articles 144 and 150 of the criminal code.
Since Sanlu, the region's largest purchaser of milk, was ordered to halt production, throwing many small dairy farmers into hardship. On 24 September, Fonterra announced that it had written down the carrying value of its investment by NZ$139 million (two-thirds), reflecting the costs of product recall and the impairment of the 'Sanlu' brand "as a direct consequence of the criminal contamination of milk in China". Chairman Henry van der Heyden said that the contamination was a criminal act which Fonterra could not have prevented. On 26 September, Fonterra CEO denied that Fonterra is selling its stake of 43% of Shijiazhuang Sanlu Group Co.
Breakup
On 27 September 2008, China Economic Net reported that Sanlu may have been bankrupted and soon be taken over by Beiijng Sanyuan Food Company Ltd.. In November, it was announced that the Sanyuan Group would acquire 4 of Sanlu's ShijiazhuangShijiazhuang
Shijiazhuang is the capital and largest city of North China's Hebei province. Administratively a prefecture-level city, it is about south of Beijing...
plants, and plants in Tangshan
Tangshan
"唐山"redirects here. For an alternative name of China, see Names of China#TangTangshan is a largely industrial prefecture-level city in Hebei province, People's Republic of China. It has become known for the 1976 Tangshan earthquake which measured 7.8 on the Richter scale and killed at least...
, Shandong
Shandong
' is a Province located on the eastern coast of the People's Republic of China. Shandong has played a major role in Chinese history from the beginning of Chinese civilization along the lower reaches of the Yellow River and served as a pivotal cultural and religious site for Taoism, Chinese...
and Henan
Henan
Henan , is a province of the People's Republic of China, located in the central part of the country. Its one-character abbreviation is "豫" , named after Yuzhou , a Han Dynasty state that included parts of Henan...
, and would assume some of Sanlu's debt. Consideration was not disclosed, but sum is said to be of the order of ¥ 800 million.
On 19 December, Sanlu secured a loan of ¥902 million to pay medical expenses of and compensation
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
to children affected by tainted milk powder it produced. It was announced on 25 December that Shijiazhuang court accepted a creditor's bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
petition against Sanlu, which reportedly had net debt of ¥1.1 billion. Shijiazhuang city, the controlling shareholder, hopes to sell its distribution network as a going concern.
Trial of executives
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
's standards on melamine. Wang, who had leaped off a building in a suicide attempt, offered his apology and remorse: "When I think of the children who were harmed ... I feel extreme inadequacy towards these sick children and their parents."
On 22 January 2009, Tian was sentenced to life imprisonment
Life imprisonment
Life imprisonment is a sentence of imprisonment for a serious crime under which the convicted person is to remain in jail for the rest of his or her life...
, while other Sanlu executives received sentences of five to fifteen years. Two other men were sentenced to death. Tian was also ordered to pay a fine of 20 million yuan (US$2.9 million). Sanlu was fined 50 million yuan ($7.3 million) despite its bankruptcy.
See also
- Food safety in the People's Republic of ChinaFood safety in the People's Republic of ChinaFood safety in the People's Republic of China is a growing concern relating to agriculture. China's principal crops are rice, corn, wheat, soybeans, and cotton in addition to apples and other fruits and vegetables. China's principal livestock products include pork, beef, dairy, and eggs...
- Chinese protein export contaminationChinese protein export contaminationProtein adulteration in the People's Republic of China refers to the adulteration and contamination of several food and feed ingredients with inexpensive melamine and other compounds such as cyanuric acid, ammeline and ammelide...