China milk crisis hits Taiwan businesses hard

Published October 6, 2008
Business Times Singapore

But some firms take measures to ensure it's business as usual

By JASON TAN
IN TAIPEI

WALK into any 7-Eleven store in Taiwan, and you would see signs displayed prominently on beverage racks reassuring customers the dairy products at the outlet are safe to consume.

'The milk used in our dairy products is either locally produced, or imported from New Zealand and Australia,' the signs state.

China's tainted-milk crisis has spilt over the straits into Taiwan, hitting the island's businesses hard.

It started on Sept 21 when King Car, a major Taiwanese beverage company which makes Mr Brown canned coffees, voluntarily recalled 120,000 cases of eight products that contained melamine.

Chinese milk suppliers were reportedly adding melamine to watered-down milk to boost protein level. The toxic industrial chemical has sickened 54,000 children and killed four in China.

King Car - which purchased plant protein from a China supplier for use in its instant coffees that later tested positive for melamine - is expected to suffer a loss of at least NT$100 million (S$4.5 million) from the recall of its products.

Taiwan, despite its political differences with China, has grown dependent on the mainland by moving production facilities there to tap the lower labour and material costs.

'Now it is impossible to be 'China-free',' King Car officials told local media on the impact of China-made merchandises.

Purchasing ingredients from China suppliers was a business strategy to diversify its supply base and lower costs, the company said.

Taiwan's three largest hypermarket chains - Carrefour, RT-Mart and Far Eastern Geant - also saw their businesses dragged down by the crisis.

Each of them has pulled at least 100 items from store shelves since the crisis struck.

'The biggest issue now is how to restore consumers' confidence on dairy products sold in the market as a whole,' Margery Ho, public relations assistant manager of RT-Mart, told BT.

RT-Mart saw its bakery sales dropped as much as 30 per cent during the first three days of the crisis.

The hypermarket later used milk from New Zealand instead for its bakeries, and slashed prices of 20 items by half for a week to restore sales.

'Now we see the bakery sales picking up to the pre-crisis level,' Ms Ho added.

But despite the milk scare, it is still business as usual for some.

'Only about 10 per cent of customers asked us about the issue. And we explained to them that our cakes didn't contain milk,' said Jocelin Lu at Awfully Chocolate, a Singapore-franchised chocolate cake shop in Taipei.

Since its opening in mid-September, customer flow at the shop had been within expectations and the milk scare did not have a visible impact on business, Ms Lu said.

And to 7-Eleven, Taiwan's largest convenient store chain with 4,800 outlets island-wide, taking steps such as sending items for safety checks apparently worked.

'Consumers still make purchases, but they switch from milk teas to drinks without milk or fresh milk produced in Taiwan,' said a public relations officer from President Chain Store Corporation, which runs 7-Eleven.