KEY POINTS:
More than half of Chinese consumers have less trust in New Zealand dairy produce because of the poisonous-milk powder crisis engulfing Fonterra, says a survey by Sinogie Consulting.
Fonterra's 43 per cent-owned Chinese dairy company San Lu is one of 22 firms caught up in the scandal over the industrial chemical melamine being added to watered-down milk to boost apparent protein levels. The contamination has made tens of thousands of infants ill and killed at least four.
Sinogie, a Hong Kong company, commissioned a survey of 300 shoppers in Beijing, Shanghai and Guangzhou between September 22 and 25 and found 51.2 per cent had less trust in New Zealand dairy produce.
Sinogie chief executive Bruce McLaughlin was surprised the figure was not higher.
"What it suggests to me is that people are still seeing this as a San Lu problem."
There was not much damage to Fonterra at present but that could change in the long term.
"I would say that Fonterra has to keep its head very low in China at the moment. I think if they start shouting too loudly about the Chinese authorities being to blame, then the Chinese authorities will react and it won't be pretty."
More than half the respondents (56.2 per cent) said they had been buying more foreign-branded dairy produce since the scandal broke, while 79.8 per cent were worried that all brands of infant formula, domestic and foreign, could be contaminated.
New Zealand came second behind the European Union when people were asked to rank food from markets for trustworthiness.
"I think New Zealand itself enjoys such a strong brand that while Fonterra is obviously probably your biggest food company, I think people will still have a lot of faith in other New Zealand brands."
Mr McLaughlin said he had seen many companies run into difficulty in China.
"I think that people are blinded by this idea of mysterious China still. Because of that they don't think that they should go in with the same level of caution [as if] investing in Australia or America or somewhere like that."
A Fonterra spokesman said the company approached its investment in San Lu very cautiously.
"Fonterra has been doing business in China for over 20 years so the company was well aware of not just the business but also the wider political and cultural complexities of operating as a foreign company in China."
Fonterra undertook very deliberate and careful due diligence before making the decision to invest, he said.
Its strategy was to progressively upgrade operations and it had also begun a plan to introduce better-quality milk to the supply chain by investing in its first farm in China.
"However, in moving to steadily improve San Lu's quality-control systems, it was impractical to be in a position to protect 100 per cent against all risks to San Lu's supply chain such as a deliberate criminal contamination."
