Abstract

Melamine incident in 2008 can be termed as Chinese milk industry’s tragedy that was resulted in causalities of a number of children and health issues of many others. This had bring a bad name to the country and the industry both that has resulted in slow down of economic process in food industry, including cancellation of international contract and attraction of bans on Chinese products. Internally, there was medical emergency and actual intervention of the government to control damage. This research has focused on the impacts of these efforts and the identification of emerging issues after eight years down the road. With the help of two surveys and one set of interviews, it has been indentified that there is an improvement in the situation, though it is not fully satisfied and hence gaps are identified and recommendations have been made, accordingly.

CHAPTER ONE: INTRODUCTION

1.0       Introduction:

Globalisation has offered a number of opportunities to the developing countries to sell their products in the international market and to reap the impact of price difference in the international markets. (Fujita and Thisse, 2013) In the recent years, Chinese economy has emerged as major contributory towards international trade in all the industries and its economic development has placed it among the leading exporting industries in the world. (Wei and Liefner, 2012) Internally, Chinese society is also developing with the economic prosperity and opportunities available for the population to raise their living standards. This change has affected the way of living as well as their consumption patterns to a considerable extent, both in food and non-food items. (Chan, 2012) The rise of non-Chinese foods and household items, including fashion is gaining space in the Chinese markets. (Zhang et al., 2014) This has created visible impacts on quality consciousness of the consumers within the country.

In the dairy products, too, Chinese market has expanded exponentially in the last three decades and was able to cover most of the dairy products available in the market meeting the industry to household consumers at the same time, showing diversity and compatibility at that time. The main exporters of Chinese dairy product are Japan, New Zealand and South Korea. (Fuller and Beghin, 2015) Its production is one the rise for last one decade with a rate of just over 20% a year that is exceptional, but the record of Chinese food products has been reported much below the international standards, especially in its dairy products. (Fuller and Beghin, 2015) On account of food safety and standards, the reservations are high and reported issues with the domestic food supplies have raised these concerns rather to another height. One of such events was ‘the melamine incident’ in 2008 which has raised concerns on the consumers have lost their faith in the domestic dairy products especially for infants and the young children. The nationwide contamination had raised certain serious issues related to this particular industry in the country. (Sun et al., 2014)

Reports have hinted over the role of Chinese government and regulatory regimes in the incidents and it has been reported that during 2008-2012, absence of legal provisions to control adultery in the food items has resulted in rejections of 20% of the orders worldwide.  There are also reports regarding numerous health related incidents within the country that irked consumers both in the domestic market as well as abroad. (Reisch et al., 2013)

This research has therefore targeted to review the dairy products in the food industry as a case to investigate and further into the powdered milk industry in the country. In this dissertation, the impacts of the melamine incident and role of Chinese rules and regulation before, during the incident and after the incident have been reviewed in this dissertation as a case study of SanLu Company.

1.1       Background of the Topic:

The melamine incident in 2008 has hit the food industry in the China and has affected its domestic and international market. Dairy and food industry in China was growing as a whole and there were certain companies performing well in the food industry. (Qiao et al., 2012) Researchers on the incidents have indicated that there were serious laps on the part of the managements in the dairy companies as well as in the supervisory control on the part of the government. (Zhang et al., 2014) It was seen that in 2008, the companies in order to improve their profit exponentially and to meet the demand of the market, the use of water in milk was prevalent, however, the situation was aggravated with the mixing of melamine, an industrial fat in the milk to meet the fat content criteria. (Kong, 2012) The loopholes in regulatory regime helped the wrongdoers and the rise of the practice within the country that was extended to powdered milk for infant. (Wu, Y., and Zhang,, 2013) This was resulted in hundred of infants’ deaths across the country and lead to nationwide investigations to probe the reasons. Among the many, there was SanLu Company that was found indulged in this practice and its popularity was badly affected by the incident. (Wu, Y., and Zhang,, 2013)

SanLu started its operation at the local level as a milk selling company and after the long 40 years of development and innovations, it appeared as large enterprise providing milk and other dairy products domestically as well as in the international market. SanLu’s processes at the company are mostly owned and possess cows and their breeding grounds. The Company possesses its own scientific research center and its processes were able to secure the State Technological Invention Award in 2008. (Tian, 2008) However after melamine incident, its reputation was drowned and the company had to file bankruptcy in 2009. Eventually, the company was purchased by SanYuan Group with 616.5 million yuan. (Jia et al., 2012) It may be added that in the initial reports, the government regulations and lack of supervisory checks in the food industry was claimed to be responsible for promotion of trend to use melamine in milk to cheat fat content tests. (Jia et al., 2012) The after effects of this incident are still evident in the market and are open to research on the impacts of this incident and governmental actions taken in this regard.

1.2       Problem Statement:

Melamine incident has posed many threats and challenges to the milk industry and the industry requires addressing the emerging issues, however, these are to be identified. Therefore, the problem statement in this research activity is to identify the emerging issues those are required to be addressed by milk industry in China after melamine incident.

1.3       Aim and Objectives:

In light of the research introduction and background, the aim of this research is to review the melamine powdered milk event's impact on China's food safety issue with the help of SanLu case study. In furtherance of this aim, following objectives have been framed to achieve at the end of this research activity.

1. To review the impacts of melamine incident, 2008 upon the food safety management in Chinese companies,
2. To review the change in Chinese regulations in food industry.
3. To analyse the regulatory situation conducive for promotion of powdered milk industry in the country again
4. To make recommendations to improve situation for organisational managements as well as policy measures for the government.

1.4       Key Research Questions:

In light of the discussion and objectives of this research, following research questions have been framed:

1. Is Chinese dairy industry’s regulatory regime supporting its development by creating confidence among the consumers?
2. Are the regulatory measures of China improved after melamine incident?
3. Have managements of companies producing powdered milk learnt their lesson after melamine incident?
4. Is Chinese powdered milk fulfilling international standards?

1.5       Research Methodology:

The research methodology adopted in this research is analytical with a mix of primary and secondary data. In order to analyse the situation in past and the present regulatory regime in China, reliance is placed on the available official records and authentic sources available, whereas in order to have the opinion of consumers (parents using powdered milk for their infants), semi-structured questionnaire based interviews have been conducted that is further analysed to compare the expectation level of the consumers with the actual position on ground. This will cover the reasons behind rising demand on imported dry milk in China and shrinking domestic market for Chinese companies like SanLu.

1.6       Scope of the Study:

As a matter of impact, the results of this study will be valid for food industry of China; however, the scope of the study is restricted to study of situation of dairy products in China after melamine incident in 2008. It is focused to indentify the gaps in the international best practices and Chinese regulatory regime in dairy products and has attempted to formulate proposals to bridge the identified gaps.

1.7       Structure of the Dissertation:

This section is aimed to introduce the reader with the structure followed in this dissertation:

Chapter One is dedicated to the structural aspects of the dissertation in which introduction to the research topic, background information, aim and objectives with research question and scope of the research has been presented.

Chapter Two is dedicated to the literature review on the research topic. In this chapter, existing literature is reviewed in light of the research objectives and therefore, redefines the direction of the research.

Chapter Three covers research methodology. It has been discussed in light of the research objectives and provides the roadmap for field activity and data analysis.

Chapter Four is dedicated to the analysis of the research data collected as the result of field activity.

Chapter five discusses the results in light of research objectives and sees whether the research questions have been answered or otherwise.

Last Chapter winds up the discussion with conclusion and recommendations.

1.8       Summary of the Chapter:

 In this chapter, initial foundation for the preceding chapters has been laid. It has provided with the purpose of the research and has indicated that which objectives this research is determined to achieve at the end of this dissertation with the scope of the research. In the next chapter, discussion on the relevant literature is made.

 

 

 

 

CHAPTER TWO: LITERATURE REVIEW

2.0       Introduction to Chapter Two:

First chapter of this dissertation was dedicated to the structural issues of this dissertation and it has covered aspects such as its aim and objectives and the research areas definition to proceed further. This has set the stage. In the second chapter, the existing body of knowledge is tried to explore to review different research areas as to the extent of already established knowledge as well as to see the gaps existing to focus more than others during the field research. This activity will help in avoiding of exploring already researched areas and hence avoid frustration at the end as duplication.

2.1       China Milk Industry in Global Perspective: A review:

After the melamine incident, there was a steep slide in the demand of the milk powder from China. Out of 1865 enterprises producing milk powered, only 432 remained in business despite government assurances and reimbursement of losses. However, a surge was again observed in Chinese milk powder after reassessment and reassurance of quality by at both central and regional levels and in 2011, there 711 manufacturing enterprises dealing in formula milk power only. The surge was on the top in 2012 when the production was leading by five top most brands and exports were reckoning at the door again. In year 2013-15 the demand for Chinese milk is improving by 17% per annum and in case of New Zealand only, in 2015 there was a demand of 140% as compared to previous calendar year (Kent, 2015) There is an expectation of US$ 25 billion by the next year. However, apprehensions are still hovering from the food security point of view. Chinese milk powder supplies are under strict observation in EU especially in New Zealand where China is main supplier. New Zealand regulatory authorities have placed infant formula milk from China on standards equivalent to pharmaceutical products and in case of any other incident like melamine, New Zealand will be the major sufferer (Alimenta, 2016).

On the other side, in case of USA, its export of milk powder is under pressure for last five years as the demand in American market is dropped in 2015 to 8,600 ME from 13900 ME in 2014 (Daily Export Council, 2016).

2.2       Food Safety: Why China Must Worry?

In the present day globalised world, the food is a chain interconnecting different people and societies. Increasing global food chain has its imprints upon the food standards and impacts upon the health of both national and international consumers (Kong, 2012). In the recent past, events like use of melamine in the milk industry and unhygienic meat supplies in some parts of the world has raised questions as to how secure food supplies must be ensured both at the local and international levels, without compromising upon the health of the end consumer, that might be at the other end of the planet where the food was actually produced (Chu et al., 2010). Melamine incident was reported in China, but its impacts were reported almost in all parts of the world and as the result some major brands like Cadbury, Lipton, Kraft, and Mars had to recall their contaminated products from the market (Wishnick, 2009). This incident has sensitised the world about the seriousness of the matter and implication of ignorance of food standards by any single party in the supply chain for the consumers (Ho, 2011). However, over the period of time, there is absence of any consensus on this important issue at either level and the major reason in this dispute is the lack of consensus on standardised testing of food items over the period of time (Dellios, Yang and Yilmaz, 2009). The emerging tests and standardisation has resulted in confusion among the users and manufacturers at the same time, as well as resulted in the cost of business (Chik et al., 2011). In case of China, the food market is marred with low profits margins, inappropriate and untrained food auditors, acceptance of corruption as part of administration and other ills and that has lead to the excessive use of artificial material in the food items and health hazards like melamine incident (Ortega et al., 2011). From another perspective, the role of central government to control maladministration in food industry is minimal; rather the government had suppressed the highlights of food safety flaws on national and international media during last Olympics games in China (ibid, 2011). Melamine incident in 2008 has resulted in serious concerns from the world health watchdogs like the World Health Organization (WHO), the Food and Agriculture Organization (FAO), and the World Trade Organization (WTO) and Chinese government was required to improve its internal checks and balances in the food industry to avoid an all out ban on her food products across the board (Wishnick, 2009). The role of food safety agencies in Europe and USA is not satisfactory too, but due to strong food standards in these societies, these countries are in the position to execute ban on the import of food items and hence is posing a serious threat to the internationalisation efforts of Chinese government in near future (Orford et al., 2014).

2.3       What is Melamine?

In the first instance, since this dissertation is considering the effect of milk adulteration with reference to melamine incident, it is important to review melamine. It is a hydro carbon with the nitrogen base with chemical formula (C3H6N6) that contains around 69% nitrogen by weight. It has major industry usage like production of Formica, resistible plastic and melamine foam used as resin and cleaning agent. Major by products of this chemical are still plastic based like containers, glues, house wares etc. that are non-recyclable on their own in the nature. It has also a commercial use in production of yellow pigment, fertilisers and drugs for sleeping illness. It has no prior known usage as food or food ingredient (Barrett and Gilbert, 2006). The basic purpose for adding melamine in milk was to defeat Kjeldahl and the Duma’s tests that are used to measure the protein counts in the milk. The protein level in these tests is based on the nitrogen contents in the milk and addition of melamine is a low cost solution to increase nitrogen contents in diluted milk (Snyder, 2007). This cheap solution tempted many farmers to add melamine in their practice and melamine popularised among the farmers as fake protein (Orford et al., 2014). It may be seen that prior to melamine incident in China, there were no toxic impacts known in the researchers upon human and it was first used in fertilisers as nitrogen base in 1950’s and later on it became a regular part of nitrogen based fertilisers (Mast et al., 1983).  Later on its use was patented in 1958 as non-protein base nitrogen source for cattle that lasted till 1978 when it was found that its hydrolysis is slow and incomplete in milk producing animals (Newton & Utley, 1978). However, the use of melamine was not stopped as being a cheap source and its presence in different food stuffs and drinks was reported in traces. First toxic indication was in the USA by 2007 where animal food stuff was reported melamine causing illness and death among the animals and this incident first time created an alarm for the researchers [US Food and Drug Administration (FDA), 2007]

2.4       Food Safety Standards and Laws in China:

Prior to melamine incident, the food regulation in China was decentralised and the local authorities were responsible for food safety measures without any national standardisation policy, therefore, there were difference in regional policies and hence chancing to avoid testing by placing units in different regions for evasion of food safety measures (Xiu, C., & Klein, 2010). The role of the PRC Administration of Quality, Supervision, Inspection, and Quarantine (AQSIQ) as primary watchdog for food safety was evaded by and large at that time (Xiu, C., & Klein, 2010).

Previously, in China, there were no defined procedures to become a farmer and become the part of a milk supply chain whereas in the European countries such a business requires a detailed registration process and training to ensure that only quality milk is being supplied as the raw material for the processed milk food. The cow raising and milk protection therefore was of no real value in the business process. Furthermore, milk collection for different companies at different spots was not regulated and there were chances of contamination. Another important flaw in the regulatory function was the lack of information compilation and the capacity to investigate the matter for fixing problem (Pei et al., 2011). After the melamine incident, China has to revise its food safety measures and to introduce a strict regulatory regime with effect of first June, 2009 that calls for strict standardisation of all processes in food manufacturing; especially milk powder formation. The law requires registration of all the firms dealing food processing and evaluation of their preservation and manufacturing process for standardisation (Pei et al., 2011). However, the process of monitoring and regulation is yet to be a big task as there are a great number of small and illegal enterprises operating as the milk production and milk collection units and these are often considered as the responsible organs for adding illegal chemicals in the milk to gain extra profits for them and hence spoils all the food chain (Dellios, Yang and Yilmaz, 2009). New food safety provisions and monitoring mechanism is reviewing to control these small and often invisible firms to reduce the chances of melamine incident in the future (Dellios, Yang and Yilmaz, 2009). 

2.5       Organisational Overview of Food Safety: Before Melamine Incident:

Little literature is available on the organisational preparedness to ensure food safety and training to provide safe food products to the consumers. In case of China, organisational attitude towards policies and regulations is observed as relax and aversive (Xiu and Klein, 2010). In food industry, especially in milk production sector, many companies were working without proper certification as to business as well as proper vaccination of their animals (Yan et al., 2009). An overview indicates a trend of increasing milk companies over the period of three decades and it was a direct result of export of Chinese milk to other countries especially Europe, however, it is also observed that at local level, there was no regulatory mechanism and these small companies were providing raw milk for formula milk (Xiu and Klein, 2010).

The organisational overview indicates that these companies were staffed with unskilled and untrained manpower for milking and storing purposes (Yan et al., 2009).  The hygiene level was inappropriate and hence the milk quality. Chinese regulatory measurements were inadequate to check the adulteration in milk whereas there was an increasing demand. It will be inappropriate to conclude that business entities were unaware about the regulatory measures as in case of melamine incident, a chemical was used to defeat nitrogen content test (Xiu and Klein, 2010).

Management in middle to large companies was however, skilled as per record and these companies were collecting major milk productions in their areas. These organisations were officiating with professional and top managements were trained. However, in absence of proper regime to control quality, internal checks were bound to weaken (Zhu et al, 2009). News reports have indicated that Sanlu Company officials were aware about the use of melamine in milk for but they didn’t take any corrective measure (China Daily, 2008; Wang, 2009). It clearly shows the presence of organisational capabilities and training to check the matter.

2.6       Melamine incident: Impacts for China:

Food imports from China are under heavy scrutiny since the opening of its trade to Europe and America and therefore, any incident questioning the quality of food items from China raises the difficulty level for its traders to trade their products abroad. Melamine incident was huge in its impacts for the Chinese food industry from the trade perspective and the risk to the lives using such products as the health concern (Rambla-Alegre et al., 2010).

First of all the health hazards of this incidents occurred in the form of hospitalisation of infants after using melamine milk and it was reported that six babies were dead and around 300,000 children across the country were reported to be affected by the toxicity affected their kidneys and urinary tracks (Ministry of Health (MOH), 2008). Majority of the affected babies were under the age of three and barely any was over the age of four. This situation created a sense of emergency all over the country and Chinese government had to intervene quickly to control the situation. It was reported that without swift action, the death toll must be much higher than the same. However, the research hers are still questioning on the later impacts of this contamination among the surviving children (Ministry of Health (MOH), 2008).

Secondly, this incident hit the local dairy industry badly. The immediate action by the authorities and the relevant companies was the recall of the contaminated milk from the market and it was a huge recall i.e. around 8,311.7 ton of unqualified milk products and 410,000 ton of milk powder (Xinhua, 2008) The impacts upon SanLu were huge and lead to its bankruptcy as the results of settling of compensation disputes. The Mengniu Group the largest liquid milk producing company in China incurred a cumulative loss over 900 million yuan as the result of this single incident (Sharma and Paradakar, 2010). Reduced demand resulted in sluggish behaviour of milk market and hence disinvestment and slaughtering of animals at the wake of their continued losses due to reduced demand (Sharma and Paradakar, 2010). Authorities’ action had stopped production of major milk products for months for verification of processes and quality that resulted in a complete halt in the dairy production at the national level for over two months resulted in cumulative loss of over two billion yuan (Xinhua, 2008a). Loss of market credibility in infant food production and formula milk is going to hit the market’s credential for a longer period of time as major importers of these food items had already issued alters and banned these products from China (Xinhua, 2008a).. Major contracts of supply chain with major brands had been cancelled and the foreign companies like Cadbury, Nestle etc. sued many Chinese suppliers for the loss incurred due to recall of their products from international market and the loss to credibility (Xinhua, 2008a). Resultantly, the year last three months of 2008 were closed with 92% fall from the corresponding months of last financial year (Zhu, 2008).

It will not be out of place to mention that the response of the international community was not restricted to the milk products but the restriction was imposed on all the foods items from China till further clarifications and verifications by their relevant authorities and this resulted in reduction in agricultural exports by 87% against average of first nine months, and 64% drop in fish and poultry exports that year (Xiaojing, 2011). It barely showed that melamine incident cost Chinese economy very heavily in 2008 and in the corresponding years.

2.7       Melamine Incident and Chinese Official Response: A review:

In the wake of the reports and the health emergency in the country, the Chinese official response was quick. China’s State Council, the executive house set up a national leading group to find the reasons, impacts and to formulate a response strategy on behalf of the government as this group comprised leading officials from health, food quality experts, and nominees of local governments (Xiaojing, 2011). In the first instance, the medical team was assigned the task to diagnose and treat the affected children so that the mortality may be controlled and the negative impacts of this menace could be controlled. This team was effective in its mission as the causality rate was minimal at the end of the whole episode.  This emergency response was fully supported by the central government in term of HR as well as costs (Xinhua, 2008b). However, this task was not easy and in order to cover the whole country, 1600 teams were constituted by the group and sent to all nock and corners whereas 4500 medical institution at central level were provided full support and medicines and 2985 city medical institutions were at the district level to respond any emergency situation. It may be seen that with such a scope, the Chinese government was able to manage the emergency after an effort spanning on two months’ time (Xinhua, 2008).

Chinese government had further introduced compensation scheme for the aggrieved families and the parent of infected children and the fund was created from contribution of 22 major companies involving in melamine incident and the purpose of this fund was to provide medical support to each and every child affected in this incident without worrying about the expenditures until the age of 18 years and during this period the children will remain under observation to review future complications of the use of melamine on their growth (Zhu & Xiaohuo, 2008). From the fund, the parents of the affected children would receive a onetime compensational grant to which the government would contribute a definite share (Xiaojing, 2011).

At the administrative and supervisory level, the government act swiftly, though not timely. Had such measures been taken earlier, event like melamine may have averted. The designated group upon receiving the lab resulted and investigation results found the SanLu group a main actor responsible for the incident preliminary and ordered the halt of the production at all sites.

The level of investigation was further enlarged to all parts of the country and quality round up was completed in all parts of the country by General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) with the support of 4.4 million part time inspectors those had concluded the report indicating the use of melamine in many food items, fertilisers, and animal feed that has potential threat of incidents like melamine in future (Xiu & Klein, 2010).

As the review of this effort, there was a major scrutiny of all the existing plants of food items, confiscation of illegal storage areas, and firms, suspension of suspicious units etc. leading to introduction of new regulation and standards to be watched in all food production especially in milk industry (Ortega et al,. 2011) In the new guidelines issued by the central government in late 2008, the AQSIQ was required to be more vigilant in supervision function and was responsible to conduct regular inspection on all the milk producing, yielding, storage and production sites to check malfunctioning and each unit will be responsible to get a revised certificate, periodically, as to the fitness of the production before selling products in the market or in the designated supply chain. New hygiene standards were introduced in the milk industry and national quality assurance council was restructured to introduce internationally recognised testing of food items and testing methods. This set of instruction introduced the maximum limit of melamine in food and milk as 1 mgkg_1 in infant formula milk and 2.5 mgkg_1 in all other milk form (Ortega et al,. 2011).

The government interventions were however, not limited to these two areas and had carefully introduced the code of ethics to protect the benefits of farmers keeping in view the economic trail and future banking upon milk sector. As the result of the melamine industry and subsequent recession in the market, farmers were lost their interest in the milk industry and soon, there was a clear indication of dry up (Pei, et al., 2011). The Chinese government provided a huge subsidy of 300 million yuan to the framers against their loss as the result of this incident in the first instance in the five regions and later on in other regions the same exercise was repeated (ibid 2011). Chinese government had further extended credit support to the affected farmers to keep their interest alive in cattle breeding and milk production (ibid., 2011).

There was an immense international pressure upon the Chinese government to enforce consumer rights within its territorial limits else before the melamine incident under WTO regime, however, after the melamine incident in 2008, this demand was rather intensified (Qiao et al., 2010). Administratively, all the food item producing companies were directed to ensure food safety tests for each batch of production and to supply only quality assured things in the market. Quality safety standards were adopted by the government to meet with the international standards and each product after the introduction of new scheme was required to be tagged as QS (ibid, 2010). Right to information about the product was accepted and no product without and with incomplete information about the product was allowed to sell in the market. However, these measures did not provided legal remedies to the consumers against violation of these requirements (Zhang et al., 2010). 

2.8       Summary of the Chapter Two:

This chapter was dedicated to the review of the existing literature on the research topic. It has been reviewed that after the melamine incident, there was a steep decrease in the production and demand of Chinese powder milks both domestically as well as internationally. However, there is recovery in market despite fears. Chinese food standards are not up to the international standards and hence lapses like melamine incidents occur. Melamine is a hydro carbon with the nitrogen base with chemical formula (C3H6N6) that contains around 69% nitrogen by weight that was not intended to be used a direct food ingredient. Use of melamine to improve nitrogen contents of food to cheat tests resulted in deaths and health concerns in thousands of infants in 2008 known as melamine incident and resulted in ruining of milk powder industry and its related export. Chinese government has taken some serious steps to recover from the incidents including health grants, establishment of compensatory fund, and a complete review of food standards monitoring process at central and regional levels. The AQSIQ’s role in food inspection and milk quality was improved and this practice is developed over the period of time. The real impacts of these steps are yet to be seen, however, re-emerging demand for Chinese milk powder is posing confidence in the situation.

CHAPTER THREE: RESEARCH METHODOLOGY

3.0       Introduction to chapter three:

In the previous chapters, structural aspects and review of the existing material has been made. Third chapter is dedicated to the discussion on the research methodology applied in this research activity in order to achieve the intended aim and objectives of this research. Importance of selection of research methodology lies in the fact that it provides the roadmap to follow to the researcher and provides the tools to be applied in collection of data and its subsequent analysis to determine whether research objective are achieved or not. In this research work, identification of the emerging issues in the wake of melamine incident is required with the aim to review the whole episode and it’s after effects, therefore, keeping in view this purpose, discussion on research methodology proceeds further. 

3.1       Research Methodologies:

Research method defines the nature of the research on the basis of the nature of the data to be applied in the research and the researchers have divided the research world in to two halves i.e. qualitative and quantitative research methods. (Flick, 2011) However, the selection of a particular research method is not influenced or subordinated with the earlier selection of research philosophy or research design (Bernard and Bernard, 2013) as both research methods are applicable equally and efficiently in all researchers depending upon the nature of data available and the results to be achieved. (Beins, 2012)

A research method will be quantitative if the available data is intense and involves a stretch of numeric, intensities, frequencies and figures, etc.  This type of data can be analysed by application of statistical formulas and need a little or no interpretation from the researcher in order to create understanding of the reader of that report. The results can be presented in self explanatory graphs, charts, relationships and tables etc. (Harvey, 2002) The quantitative research methods further offers extrapolation of the results into future or seeking trends of the past to a definite degree of assurance and hence are very suitable in market based researches for market analysis and check trends in future markets. (Saunders et al., 2011) This research method has some definite advantages as it is time saving and less costly than the other one with more specific results than qualitative researchers and hence is a preferred choice in social researchers especially within academic circles. (Denzin, 2009)

At the same time, the qualitative research methods are descriptive and hence cannot be arranged into presentation of tables and graphs, rather in order to understand by the reader, interpretation of the research and inference is required. Data involve in these researchers is often verbal, conversational, opinion based, and is in form of descriptive records, written and recorded material, observations, discussions and available research material on the research topic. (Saunders et al., 2012) This data when placed on the record makes no sense until arranged in logical order and then interpreted on the basis of factual elations established by the researcher in that particular research activity in light of both internal and external environment of the research sphere. These internal and external elements include both micro elements like the behaviour of the individual or group at that specific time or the market trends and economic situation at the global level. (Malhotra Naresh, & Birks, 2003) The results of qualitative researchers might lack scientific connotation and are deduced by the researcher on the basis of correlations he found in the whole equation, and therefore, might be influenced by her own prejudices. Similarly at the same time, this method is time consuming and laborious with an added cost. (Groves et al., 2014)  But despite these facts, qualitative research method is well placed in the social researchers and in anthropology it is preferred to study mass behaviour efficiently. (Malhotra Naresh, & Birks, 2003)

Mixed methods indicate to the mix of both qualitative and quantitative research methodologies where the researcher opts to use both due to versatility and diversity of the data available. (Saunders et al., 2012)  Furthermore, it may also be applied to substantiate or refute results with both the methods e.g. market survey indicates some future trends and the experts opinion n form of consultative group is opining in one other direction shows the division of opinion on the same issue and both opinions are derived from two different research methodologies in a single research. Nonetheless, the both results could be corroborative too. (Saunders et al., 2012)

3.2       Choice of Research Method:

Selection of a research method is directly subservient to the objectives it is intended to achieve and the nature of the intended data. (Saunders et al., 2012) in the previous section it has been identified that there are three clear options as to the research methods, i.e. qualitative, quantitative and mixed research methods and either of these will suit this research activity, too.

First of all, the aim of this research is to identify the emerging issues those are required to be addressed by milk industry in China after melamine incident. The best approach to study past events is to research it on the basis of present and available historical record. There is one best strategy is to review the exiting material published on the topic in the recent years and the reviews thereupon. The same may be compared and contrasted with the trends emerging in the market and milk industry. It may either be done by the help of post reviews of the effected families and the governmental interventions using either quantitative or qualitative methods. The use of surveys or interviews, therefore, will be able to reflect upon the official strategies and the resultant outcomes.

In this research, however, the selective method is mixed as results of interviews are qualitative and that of survey will be presented as quantitative.

3.3 Research Method(s) Adopted:

In the previous section, it has been discussed that qualitative research methodology is best suited in this research. It was selected as the nature of the data available in case of melamine incident is mostly in form of reports, analysis and researches discussing its causes and impacts. However, some of the data in form of the opinion will also be formed part of this research for analysis. In this section, further discussion is made on the remaining parts of research methodology on the basis of pyramid suggested by Saunders et al., (2012)

3.3.1    Research Design:

In the research methodology pyramid, next to philosophy comes the research design. It represents the governing rules and regimes of the research at the time of data collection and its analysis. It is said that each research has its own individual and independent environment, both internal and external leading to definition of constraints it has. (Saunders et al., 2011) These restrictions lead to adoption of the available governing rules. The research theorists have identified three sets of research designs, irrespective of the research philosophy it follows i.e. fixed, flexible and mix research designs. (Flick, 2011) The selection of a research design is again dependent upon the nature of the research as there are researches that are disciplined and need strict criteria to follow and hence are suited to the fixed research design. (Robson, 2002) The possible research designs are Descriptive, Experimental, Semi Experimental, Review, Correlation and Meta-Analytical. (Bernard and Bernard, 2013)

On the other hand, there are researches initially for those no set pattern may not be defined and therefore, the design remains open till the actual data collection and are suited for the flexible research design to adjust last minute changes. In flexible research design a researcher can change research methodology e.g. he can change in the data collection technique, nature of the questionnaire applied or number of the participants in the survey. (Bernard and Bernard, 2013) There could be other researches where a mix of both is effectively applied to ensure the desired results and this is called as the fixed research design. (Robson, 2002)

The selection of either research design is again directly influenced with the objectives of that research, intended to achieve. All factors that can influence the results of the research must be kept in mind at the time of the selection of research design. Presence of the controllable elements under experimental model may leads to selection of fixed research design whereas variables like human behaviour and societal tendencies, consumer trends, however require flexible research designs to accommodate research tools accordingly. (Creswell, 2013) In this research, the influence of human policies and decisions are the deciding variable both at the organisational level and the governmental level that resulted in melamine incident as well as played its part in the recovery from the impacts of that incident. The study of this whole scenario cannot be made in watertight compartment rather needs a comprehensive interaction of all the human behaviour related factors. Therefore, the choice is flexible research design.

3.3.2    Development of Research Instrument:

Research instrument is about how of the research methodology and defines the tool to be applied in a particular research. Researchers have defined a number of research strategies / instruments to collect data including experiments, interviews, surveys, observational methods and case studies. (Saunders et al., 2012)

It helps in planning data collection and an effective research strategy leads towards the collection of best related data that may lead towards a purposeful conclusion at the end of the research. Each set of environment has its own preferable research strategy and in this present research, the study is revolving around the historical qualitative data of one particular incident i.e. melamine incident 2008. The material and data about the incident can be found independent of other events and incidents and hence suggest the application of semi-structured interviews of the authorities and a structured survey of user of powdered milk as best suited research strategy. 

• Interviews:

Interview is a method to obtain the personal opinion of a participant while approaching him in person and the interaction between the researcher and the interviewee is intimate and frequent. Interview as the mode of collecting data offer a degree of liberty to ask question as well as to explain the answers to the respondent with clarity. Unlike surveys, that are impersonal, there is opportunity to add more inquisitive statements to verify the assertions made by the respondent that infuse conformity. An interview, however, may be based on structured, unstructured or semi-structured questionnaires. (Saunders et al., 2012)

A structured interview is one where all the participants are asked identical question and the respondent has limited and defined choices to explain her opinion. On the other hand, in unstructured interview, questions are open ended and are not defined and hence the researcher is at liberty to ask any question as per the arising scenario during the discussion. In the mid, however, is the semi-structured questionnaire based interviews where a structured questionnaire is prepared but if required, new question on spot may be asked or explanations may be sought for clarification. (Saunders et al., 2012)

• Survey:

Survey is a data collection tool which often used where the population of the research is too big to cover and it is not possible to approach each and every person individually. Usually, these surveys are based on structured questionnaires as explained earlier in case of interviews, but may be unstructured or semi structured.

At the same time, a structured survey to have the opinion of the users of powdered milk was scheduled as it will provide the first hand opinion of the users and their confidence level at the national level. This structured survey was conducted personally visiting to different malls in the town.

3.3.3    Data Types:

Data is the most important element in a research activity and it is of two types: Primary and secondary data (Saunders et al, 2012).

• Primary data:

Data is said to be primary when it has no independent existence of its own but with the research in which it is going to be used. For this purpose, the researcher itself conduct a field activity to collect data using the research instruments like observations, experiments, surveys, interviews or consultative expert opinions. This data is collected with the intended aim and objectives of the research in mind and hence is to the point. (Saunders et al, 2012) The collection of primary data is sometimes costly and time consuming. Its very nature defined the advantage of primary data and in search of most relevant answers, the researcher may repeat its search as many times he requires and hence the process of truth seeking is open. (Bryman and Bell, 2011)

• Secondary data:

On the other hand, secondary data is one that is in existence prior to and independent from the research in which it is intended to be applied. It has its own identity and sources and was not collected to satisfy the objectives of the research in which it is intended to be applied. The sources of secondary research are also defined as already existing researchers, surveys, encyclopaedia, reports, newspapers, reports etc. The secondary data may be applied in intended research with or without necessary modifications. Among its advantages, it is cheap and may be easily available as compare to primary data. However, the data reliability is lesser than the primary data. (Bryman and Bell, 2011)

This research is mainly based on the primary data collected using survey and interviews has been used for current opinion and situation on the incident.

3.3.4    Population and Sampling:

The scope of the research has already been defined in the chapter one and it is clear that melamine incident is a wide scale incident that could not be covered exclusively due to wide population to cover. Therefore, for the purpose of this research, the sample to interview was selected as 5 and these are officials involved in policy making and implementation after melamine incident. The sample is selected on the basis of relevance and availability since these are high ranking officials and their availability is difficult to ensure as per choice.  Duration of each interview was 30-35 minutes.

For survey, the sample size is 150 and the selection is purely random and stratified. The participants are only parents of the infants using powdered milk, hence stratified and anyone within this category can respondent to the extent. The responses are achieved through physical visits to different malls where no restriction / bar were placed to participate.

3.3.5    Data Analysis:

There are a number of data analysis techniques available for both qualitative and quantitative researches; however, discussion under this head is restricted by the selection as to strategy i.e. case study. In this regard, Saunders et al., (2011) and Bryman and Bell, (2011) have defined methods of analysis like thematic analysis, content analysis, pattern matching techniques, explanation-building technique and time series analysis etc. In this research, the data is analysed using both content analysis of the interviews and the frequency matching of the answers of surveys. For this purpose, SPSS software is applied.

Questionnaires are placed at Annexure A and B for survey of client and company, respectively. Questionnaire for government officials are placed at annexure C. The discussions were recorded using a digital Dictaphone. Once the interviews were over, they were transcribed, moreover word to word, on word documents. A sample of the interview transcriptions is given in an Appendix C.

3.4       Data Validity and Reliability:

In the instant research, the data applied is collected from interviews and survey on the other. For the primary data the records are maintained and questionnaires are developed minimising biases and to the point.

3.5       Ethical Issues:

In order to ensure the research reliability and authenticity, the researcher has followed all university guidelines on ethics: basic tenants are as given below:

• Security and data privacy is ensured and identity of all the participants is secured. Pseudo names are used for participants in interviews. 
• Appropriate referencing is ensured and all credits are duly recorded.
• No biased approach is adopted and all analysis and inferences are neutral to ensure credibility.
• Right selection of research methodology is ensured to get the answers of all research questions.

3.6       Summary of the Chapter Three:

This chapter was dedicated to the selection of research methodology. In this research, it has been defined that the research design is flexible and research method is qualitative. It is aimed to use primary data collected by the use of interviews and survey. The data will be analysed with the help of SPSS software.

 

 

CHAPTER FOUR:   DATA PRESENTATION AND ANALYSIS

4.0       Introduction:

In the previous chapter, discussion was made on the selection of research methodology and for the purpose of data collection, two different tools were selected. In the first instance, two structured questionnaire based surveys of customers and the management of SanLu has been conducted and later on an interview with semi structured questionnaire of the Chinese food officials have been completed. In this chapter, the data so collected has been presented after analysis at SPSS. This data has been presented with the help of tables and charts for an easy understanding and comprehension of the reader and have been analysed in connection with the research objectives.  

4.1       Customer Survey: Data Presentation of Annexure-A:

Among the surveys, first survey was about the opinion of the customers (the parents of the children on formula milk). The questionnaire is placed at Annexure A and in this space, the results of this survey has been presented.

Annexes are composed of two parts. In the first part, personal information including names were requested, however, this information is strictly personal and confidential and in this research none is shared but the impacts of these information. All the participants have been assured of security of their data. In this first part, ages and genders of participants has been impacted to ensure the diversity of the sample used and the representation of demographically diverse group.

4.1.1Ages of the participants:

After seeking personal particular of the respondents separately, they were requested to indicate their ages. For the purpose of analysis, three age groups were indicated and the data shows the representation of all the ages in this survey.  In the first bracket (20-25 years of age) there were 17.4%, in second bracket (26-35 years of age) there are 38% and in third bracket (36-50 years of age) there are 44.7%. However, over 50 years of age, there was no participant. The same results have been presented in graphical format for a quick look as under:

Age
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	20-25	26	17.3	17.3	17.3
	26-35 years of age	57	38.0	38.0	55.3
	36-50 years of age	67	44.7	44.7	100.0
	Total	150	100.0	100.0

 

Table 4.1

 

Chart 4.1

4.1.2.Gender:

Gender is the other demographical indicator and therefore, the group surveyed has also been analysed on the bases of gender diversity. The results indicate that there were 41.3% males in the sample and rest were women. The data shows a good number of males and this would be of the benefit in order to have gender neutral opinion on the issues raised in this survey. The same results have been presented in graphical format for a quick look as under:

Gender
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Male	62	41.3	41.3	41.3
	female	88	58.7	58.7	100.0
	Total	150	100.0	100.0

 

Table 4.2

Chart 4.2

4.1.3.Age of Respondent’s Child:

Since all the respondents in this survey are parents of children on milk, particularly, using formula powdered milk, therefore, it was felt necessary to include the ages of their child on milk. The result shows that up to the age of one year, there were 17.3% and 1-3, there were 63.3% babies. The rest were falling in third age group i.e. 3-5 years of age. The same results have been presented in graphical format for a quick look as under:

Age of child
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	1	26	17.3	17.3	17.3
	1plus -3	95	63.3	63.3	80.7
	3 plus-5	29	19.3	19.3	100.0
	Total	150	100.0	100.0

Table 4.3

Chart 4.3

4.1.4.Question No. 1: Were you aware of melamine incident?

The second part of the questionnaire is about the objective questioning into the subject matter. Each question is included with an intention to explore a particular aspect and in order to facilitate the respondents; each question has a set five degree scale. Participants / respondents were however, required to select only one best suited to their reply.

The first question of the survey was about the information about melamine incident of the participants. They were asked if they were aware of melamine incident. 57.3% had shown that they are strongly agreed indicating their confident knowledge about the incident. At the same time, another 39.3% indicated knowledge about the incident. That shows that a collective of 96.7% respondents are aware about the incident. Only3% had shown their ignorance about the incident. This shows a level of information and will provide a degree of confidence in the results as all the other questions are subservient to this information. The same results have been presented in graphical format for a quick look as under:

Were you aware of melamine incident?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	86	57.3	57.3	57.3
	Agree	59	39.3	39.3	96.7
	No Reply	3	2.0	2.0	98.7
	Disagree	1	.7	.7	99.3
	Strongly disagree	1	.7	.7	100.0
	Total	150	100.0	100.0

Table 4.4

Chart 4.4

4.1.5.Question 2: Do you think that official response of the government during melamine incident was rational and correct?

The other question was about the opinion of the participants about the official response of the Chinese government over melamine incident. The question was do they think that official response of the government during melamine incident was rational and correct? About the rational and correctness of official response, 28.7% strongly favoured the government whereas another 36.7% felt comfort in the response. 14.7% did not responded indicating lack of knowledge or opinion in this regard. Rest 20% were not comfortable with the official response over melamine incident. The same results have been presented in graphical format for a quick look as under:

Do you think that official response of the government during melamine incident was rational and correct?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	43	28.7	28.7	28.7
	Agree	55	36.7	36.7	65.3
	No Reply	22	14.7	14.7	80.0
	Disagree	18	12.0	12.0	92.0
	Strongly disagree	12	8.0	8.0	100.0
	Total	150	100.0	100.0

 

Table 4.5

Chart 4.5

4.1.6.Question 3: As a parent, are you using Chinese powdered / formula milk for your child, frequently or occasional?

In order to investigate that as parents how  much of these are using powdered milk for their children they were asked if they are using Chinese powdered / formula milk for your child? Statistics indicates that 78.7% are using powdered milk out of those 60% is frequent and rest is occasional. Remaining 20% are not using powdered formula milk at all. The same results have been presented in graphical format for a quick look as under:

As a parent, are you using Chinese powdered / formula milk for your child, frequently or occasional?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	89	59.3	59.3	59.3
	agree	29	19.3	19.3	78.7
	No Reply	1	.7	.7	79.3
	Disagree	22	14.7	14.7	94.0
	Strongly disagree	9	6.0	6.0	100.0
	Total	150	100.0	100.0

Table 4.6

Chart 4.6

4.1.7.Question 4: As a parent, do you think that Chinese powdered / formula milk is now safe for your child?

In order to have an opinion about the safety of powdered milk now for their children, it was asked that if they think that Chinese powdered / formula milk is now safe for your child.

For 54% the powder milk is safe for child’s consumption and for 38% there are doubts / disagreement. The degree of disagreement is further bifurcated as 26% are disagreed to the safety of the milk whereas rest 12% have serious doubts. 8% remained neutral and did not reply. This indicates presence of reasonable doubts in the minds of parents using powder formula milk for their children. The same results have been presented in graphical format for a quick look as under:

As a parent, do you think that Chinese powdered / formula milk is now safe for your child?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	62	41.3	41.3	41.3
	Agree	19	12.7	12.7	54.0
	No Reply	12	8.0	8.0	62.0
	Disagree	39	26.0	26.0	88.0
	Strongly disagree	18	12.0	12.0	100.0
	Total	150	100.0	100.0

 

Table 4.7

 

Chart 4.7

4.1.8.Question 5: As a parent, do you think that Chinese intervention to ensure milk safety after melamine incident is adequate?

In order to have an opinion about the impact of Chinese interventions upon milk safety after melamine incident, they were asked if they think that Chinese intervention to ensure milk safety after melamine incident is adequate. The statistic shows that 57.3% are confident in adequacy of these measures whereas 27.3% have shown their resentment. No-satisfaction couple with no reply constitute 32.6% that is one third and shows that Chinese government is still not able to assure their people about safety of the milk. The same results have been presented in graphical format for a quick look as under:

As a parent, do you think that Chinese intervention to ensure milk safety after melamine incident is adequate?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	53	35.3	35.3	35.3
	agree	33	22.0	22.0	57.3
	No Reply	8	5.3	5.3	62.7
	Disagree	32	21.3	21.3	84.0
	Strongly disagree	24	16.0	16.0	100.0
	Total	150	100.0	100.0

 

Table 4.8

Chart 4.8

4.1.9.Question 6: As a parent, do you think that milk producing companies in the country have mended their ways after new regulatory measures?

Impacts of official measures and regulatory reforms upon milk companies’ practices have been reviewed in this question. They were asked that if they think milk producing companies in the country have mended their ways after new regulatory measures. 44% think that companies have mended their ways whereas 40.7% have not agreed to the statement in this question. A substantial number of the respondents have not replied i.e. 15%. Therefore, this is a clear case of lack of confidence in official measures yet. The same results have been presented in graphical format for a quick look as under:

As a parent, do you think that milk producing companies in the country have mended their ways after new regulatory measures?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	56	37.3	37.3	37.3
	agree	10	6.7	6.7	44.0
	No Reply	23	15.3	15.3	59.3
	Disagree	49	32.7	32.7	92.0
	Strongly disagree	12	8.0	8.0	100.0
	Total	150	100.0	100.0

 

Table 4.9

Chart 4.9

4.1.10.Question 7: Are you aware of regulatory measures taken by the governments at different level?

This is a confirmatory and eliminating question to see that if all the respondents are aware of the regulatory measures imposed by the government so that exclusion in the result if required may be made. They were asked if they are aware of regulatory measures taken by the governments at different level. 90% have indicated that they are aware of the steps taken by the Chinese government after melamine incident and only 6% showed their ignorance. This gives 90% assurance in the results as appeared. The same results have been presented in graphical format for a quick look as under:

Are you aware of regulatory measures taken by the governments at different level?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	100	66.7	66.7	66.7
	agree	35	23.3	23.3	90.0
	No Reply	6	4.0	4.0	94.0
	Disagree	3	2.0	2.0	96.0
	Strongly disagree	6	4.0	4.0	100.0
	Total	150	100.0	100.0

Table 4.10

Chart 4.10

4.1.11.Question 8: As a parent, do you think that Chinese milk is safer than imported milk powders?

The respondents were asked if they considered Chinese milk safer than imported powder milk. Only 32% agreed to the question and 60% considered imported powder milk safer then the Chinese milk powder products. This shows lack of trust among the Chinese people over local milk after melamine. This result has also been presented as pie chart and tabular frequency as under:

As a parent, do you think that Chinese milk is safer than imported milk powders?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	36	24.0	24.0	24.0
	Agree	13	8.7	8.7	32.7
	No Reply	10	6.7	6.7	39.3
	Disagree	65	43.3	43.3	82.7
	Strongly disagree	26	17.3	17.3	100.0
	Total	150	100.0	100.0

Table 4.11

Chart 4.11

4.1.12.Question 9: Do you think that melamine incident has dented Chinese reputation in the international market?

The respondents were asked that if they think that melamine incident has dented Chinese reputation in the international market. 68% agreed to the question and 16% considered that melamine incident has not impacted upon the reputation of Chinese milk in the international market. This result has also been presented as pie chart and tabular frequency as under:

Do you think that melamine incident has dented Chinese reputation in the international market?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	68	45.3	45.3	45.3
	Agree	34	22.7	22.7	68.0
	No Reply	24	16.0	16.0	84.0
	Disagree	6	4.0	4.0	88.0
	Strongly disagree	18	12.0	12.0	100.0
	Total	150	100.0	100.0

Table 4.12

Chart 4.12

4.1.13.Question 10: As a parent, do you think that present official regulatory regime is providing enough security to you to prefer Chinese powdered milk over imported milk?

As parents, respondents were asked if they think that present official regulatory regime is providing enough security to them to prefer Chinese powdered milk over imported milk. As the opinion gathered, it is evident that only 34% respondents are satisfied with the present level of security whereas 54% have concerns. However, 12% have selected no reply option. This result has also been presented as pie chart and tabular frequency as under:

As a parent, do you think that present official regulatory regime is providing enough security to you to prefer Chinese powdered milk over imported milk?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	40	26.7	26.7	26.7
	agree	11	7.3	7.3	34.0
	No Reply	18	12.0	12.0	46.0
	Disagree	56	37.3	37.3	83.3
	Strongly disagree	25	16.7	16.7	100.0
	Total	150	100.0	100.0

Table 4.13

Chart 4.13

4.1.14.Question 11: Do you see future of Chinese powdered milk bright in local market?

This question is linked with the opinions articulated in the previous questions and it was aimed to have a verdict about the future milk market in China. They were asked that if they see future of Chinese powdered milk bright in local market. 50% of the respondents have faith in future prosperity of Chinese milk market within China. 7.3% did not reply to this question and 42.7% have opted to disagree with the statement in the question. Results of the survey in graphical and tabulated form are given as under:

Do you see future of Chinese powdered milk bright in local market?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	40	26.7	26.7	26.7
	agree	35	23.3	23.3	50.0
	No Reply	11	7.3	7.3	57.3
	Disagree	54	36.0	36.0	93.3
	Strongly disagree	10	6.7	6.7	100.0
	Total	150	100.0	100.0

Table 4.14

Chart 4.14

4.1.15.Question 12: Do you see future of Chinese powdered milk bright in international markets?

This question is the continuation of the earlier and is posed in terms of international market. Respondents were asked that if they see future of Chinese powdered milk bright in international markets. The results are further reduced to 38% agreement with 43% disagreement. However, a large number of participants opted not to reply that shows their lack of knowledge or understanding of international market. This result has also been presented as pie chart and tabular frequency as under:

Do you see future of Chinese powdered milk bright in international markets?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	29	19.3	19.3	19.3
	agree	28	18.7	18.7	38.0
	No Reply	29	19.3	19.3	57.3
	Disagree	60	40.0	40.0	97.3
	Strongly disagree	4	2.7	2.7	100.0
	Total	150	100.0	100.0

Table 4.15

Chart 4.15

4.1.16.Question 13: As a parent, in your opinion, the use of melamine has been stopped in local production of milk?

It is a question as to believe or perception after the official efforts after melamine incident. They were asked that if in their opinion, the use of melamine has been stopped in local production of milk. It is dismayed to note that level of confidence upon the companies and assurance as to no melamine use is only 33% and 42% are still fearing the use of melamine in Chinese milk industry. However, 24.7% have no opinion or they are not sure about the situation. This result has also been presented as pie chart and tabular frequency as under:

As a parent, in your opinion, the use of melamine has been stopped in local production of milk?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	41	27.3	27.3	27.3
	agree	8	5.3	5.3	32.7
	No Reply	37	24.7	24.7	57.3
	Disagree	49	32.7	32.7	90.0
	Strongly disagree	15	10.0	10.0	100.0
	Total	150	100.0	100.0

Table 4.16

Chart 4.16

4.1.17.Question 14: As a parent, do you think that official response to the affected people in melamine incident was fair in terms of medical facilities and compensations?

This question was in the backdrop of the Chinese official efforts to make up the impacts of melamine incident soon after the incident. Respondents were asked that if they think, that official response to the affected people in melamine incident was fair in terms of medical facilities and compensations. 67% have found these efforts fair whereas 15% as not fair. This by and large shows an appropriateness of the official reaction. This result has also been presented as pie chart and tabular frequency as under:

As a parent, do you think that official response to the affected people in melamine incident was fair in terms of medical facilities and compensations?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	35	23.3	23.3	23.3
	Agree	66	44.0	44.0	67.3
	No Reply	11	7.3	7.3	74.7
	Disagree	33	22.0	22.0	96.7
	Strongly disagree	5	3.3	3.3	100.0
	Total	150	100.0	100.0

Table 4.17

Chart 4.17

4.1.18.Question 15: Will you prefer Chinese milk for your child?

The respondents were asked if in the present scenario, they will prefer Chinese milk for their children. 44.7% agreed to the use of Chinese milk and 53.3% opted to not to use. This shows close results though majority showed no or little confidence in Chinese milk. This result has also been presented as pie chart and tabular frequency as under:

Will you prefer Chinese milk for your child?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	43	28.7	28.7	28.7
	agree	24	16.0	16.0	44.7
	No Reply	3	2.0	2.0	46.7
	Disagree	75	50.0	50.0	96.7
	Strongly disagree	5	3.3	3.3	100.0
	Total	150	100.0	100.0

 

Table 4.18

Chart 4.18

4.2.Management Survey: Data Presentation of Annexure-B:

Annexure B pertains to the survey of the management working in SanLu Company. For this survey, visit to the company’s site was selected and only presently employed staff is surveyed. The scheme of questions is same as followed in the first questionnaire and hence this data presentation has followed the similar methods as used in first part of this chapter.

4.2.1.Age:

Managers were requested to provide their particular (optional) including their ages and genders. There were four age groups and all are represented in this survey. There were 14.7% (under 20 years of age), 51.3% (21-35 years of age) as largest group. 28.7% are within the bracket of 36-50 years and rest are over 50 years of age. This result has also been presented as pie chart and tabular frequency as under:

Age
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Under 20 years of age	22	14.7	14.7	14.7
	21-35 years of age	77	51.3	51.3	66.0
	36-50 years of age	43	28.7	28.7	94.7
	Over 50 years	8	5.3	5.3	100.0
	Total	150	100.0	100.0

 

Table 4.19

Chart 4.19

4.2.2.Gender:

The respondents were further requested to indicate their gender. It is found the 58.7% are male and other 41.3% are female. This shows fair representation of both genders in an otherwise male dominated industry. This result has also been presented as pie chart and tabular frequency as under:

Gender
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Male	88	58.7	58.7	58.7
	Female	62	41.3	41.3	100.0
	Total	150	100.0	100.0

Table 4.20

Chart 4.19

4.2.3.Management level in which respondent is engaged:

There are different levels of management in an organisation and in a random survey; no filter is applied so that all the tiers of management could be participated. In order to review that if the sample is representative all the three tiers, a request was introduced to indicate level of management in the company. Statistics shows that 53% respondents are from middle tier of management or from the implementing tiers. 30% are lower managers with little or no knowledge of policies but apt in processes. 17% were from the top management those can put their opinion on true policies. But for the purpose of this survey, there is a unified reply approach and no separate frequencies have been opted for different cadres. This result just indicates level of participation of different cadres. This result has also been presented as pie chart and tabular frequency as under:

Management Level
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	top	5	17	17	17
	middle	16	53	53	70.0
	lower	9	3.0	30.0	100.0
	Total	30	100.0	100.0

Table 4.21

Chart 4.21

4.2.4.Question 1: Were you aware of melamine incident?

In the first question, the managers of SanLu Company were asked on primary question as to if they are aware of melamine incident. 88% of the managers showed their awareness about the incident. There were only 5.3% who were not aware about the issue and 6.7% did not reply to the question. This shows that a substantial majority has knowledge of the incident and the level of confidence on result is around 90%. This result has also been presented as pie chart and tabular frequency as under:

Were you aware of melamine incident?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	92	61.3	61.3	61.3
	Agree	40	26.7	26.7	88.0
	No Reply	10	6.7	6.7	94.7
	Disagree	7	4.7	4.7	99.3
	Strongly disagree	1	.7	.7	100.0
	Total	150	100.0	100.0

 

Table 4.22

Chart 4.22

4.2.5.Question 2: Do you think that organisation was aware of the use of melamine?

Mangers were asked that if in their opinion, the organisation (top management as explained during survey) was aware of the use of melamine in milk. The results show that 78% believe in the knowledge of the organisation about the use of melamine and only 18.6% think that the top management had no knowledge about the said use of melamine in milk production. This result has also been presented as pie chart and tabular frequency as under:

Do you think that organisation was aware of the use of melamine?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	70	46.7	46.7	46.7
	agree	47	31.3	31.3	78.0
	No Reply	5	3.3	3.3	81.3
	Disagree	23	15.3	15.3	96.7
	Strongly disagree	5	3.3	3.3	100.0
	Total	150	100.0	100.0

Table 4.23

Chart 4.23

4.2.6.Question 3: Were the management trained to ensure food safety?

Since in the last question, it is found that 78% respondents believe in the knowledge of use of melamine, the importance to know that whether it was ignorance or deliberate on the part of the organisation. In response to the query that whether the management was trained to ensure food safety, the results show that 38% believe that management was trained but 56% considered them as not trained this gives a major benefit of doubt to the management that this use was a mistake or not deliberate. This result has also been presented as pie chart and tabular frequency as under:

 

Were the management trained to ensure food safety?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	21	14.0	14.0	14.0
	Agree	36	24.0	24.0	38.0
	No Reply	9	6.0	6.0	44.0
	Disagree	29	19.3	19.3	63.3
	Strongly disagree	55	36.7	36.7	100.0
	Total	150	100.0	100.0

 

Table 4.24

 

Chart 4.24

4.2.7.Question 4: As company official, do you think that Chinese powdered / formula milk is now safe for children?

In this question, as company official they were asked that if they think that Chinese powdered / formula milk is now safe for children. 80.7% responses are in agreement with the statement that shows that company’s employees have a lot of confidence in present day milk production. 13.3% have no faith and only 6% did not reply to the question. This result has also been presented as pie chart and tabular frequency as under:

As company official, do you think that Chinese powdered / formula milk is now safe for children?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	67	44.7	44.7	44.7
	agree	54	36.0	36.0	80.7
	No Reply	9	6.0	6.0	86.7
	Disagree	15	10.0	10.0	96.7
	Strongly disagree	5	3.3	3.3	100.0
	Total	150	100.0	100.0

 

Table 4.25

Chart 4.24

4.2.8.Question 5: As company official, do you think that Chinese intervention to ensure milk safety after melamine incident is adequate?

In this question, as company official they were asked that if they think that Chinese intervention to ensure milk safety after melamine incident is adequate. The response was 58% affirmative and 28.7% in negative. 13.3% did not respond to the question. Results show that majority of the employees / management has a confidence in official response and efforts. This result has also been presented as pie chart and tabular frequency as under:

As company official, do you think that Chinese intervention to ensure milk safety after melamine incident is adequate?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	19	12.7	12.7	12.7
	agree	68	45.3	45.3	58.0
	No Reply	20	13.3	13.3	71.3
	Disagree	30	20.0	20.0	91.3
	Strongly disagree	13	8.7	8.7	100.0
	Total	150	100.0	100.0

 

Table 4.26

Chart 4.26

4.2.9.Question 6: Do you believe that melamine incident can be avoided?

In this question, as company official they were asked that if they think that melamine incident can be avoided. 65.3% of the respondent believes that this incident can be avoided whereas, 24% think this was not avoidable. 10.7% did not respond. The majority still feel that being avoidable; it was a fault that can be checked. This result has also been presented as pie chart and tabular frequency as under:

Do you believe that melamine incident can be avoided?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	29	19.3	19.3	19.3
	Agree	69	46.0	46.0	65.3
	No Reply	16	10.7	10.7	76.0
	Disagree	24	16.0	16.0	92.0
	Strongly disagree	12	8.0	8.0	100.0
	Total	150	100.0	100.0

 

Table 4.27

Chart 4.27

4.2.10.Question 7: As company official do you believe that use of melamine as deliberate?

In this question, as company official they were asked that if they believe that use of melamine as deliberate. This is in confirmation of the results of question no. 3 of this survey. Statistic shows that 34.7% believe that it was deliberate and 46.7% disagreed to the impression that it was deliberate. Silent population was 18.7%. This however confirms the results of earlier question no. 3. This result has also been presented as pie chart and tabular frequency as under:

As company official do you believe that use of melamine as deliberate?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	20	13.3	13.3	13.3
	agree	32	21.3	21.3	34.7
	No Reply	28	18.7	18.7	53.3
	Disagree	49	32.7	32.7	86.0
	Strongly disagree	21	14.0	14.0	100.0
	Total	150	100.0	100.0

Table 4.28

Chart 4.28

4.2.11.Question 8: As company official do you believe that had this incident was not happened, the use of melamine would not be stopped?

In this question, as company official they were asked that if they believe that had this incident was not happened, the use of melamine would not be stopped. Statistic shows that 60% believe that it could not be stopped and 28.7% disagreed to the impression that it it could not be stopped. Silent population was 11.3%. Tabulated results and graphical representation of the same has been given as under:

As company official do you believe that had this incident was not happened, the use of melamine would not be stopped?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	29	19.3	19.3	19.3
	agree	61	40.7	40.7	60.0
	No Reply	17	11.3	11.3	71.3
	Disagree	25	16.7	16.7	88.0
	Strongly disagree	18	12.0	12.0	100.0
	Total	150	100.0	100.0

 

Table 4.29

Chart 4.29

4.2.12.Question 9: Do you think that melamine incident has dented Company’s in the international market?

In this question, as company official they were asked that if they that melamine incident has dented Company’s in the international market.

86% responses agreed that it has dented Company’s reputation in international market whereas only 8% thought otherwise. Tabulated results and graphical representation of the same has been given as under:

Do you think that melamine incident has dented Company’s in the international market?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	17	11.3	11.3	11.3
	agree	112	74.7	74.7	86.0
	No Reply	8	5.3	5.3	91.3
	Disagree	2	1.3	1.3	92.7
	Strongly disagree	11	7.3	7.3	100.0
	Total	150	100.0	100.0

 

Table 4.30

Chart 4.30

4.2.13.Question 10: Has the management learnt its lesson?

In this question, as company official they were asked that if they think that the management has learnt its lesson. 44.7% responses are in agreement whereas 44% with 21.3% no reply option. The results are evenly poised as to the impacts of the incident on organisational behaviour. Tabulated results and graphical representation of the same has been given as under:

Has the management learnt its lesson?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	23	15.3	15.3	15.3
	agree	44	29.3	29.3	44.7
	No Reply	32	21.3	21.3	66.0
	Disagree	39	26.0	26.0	92.0
	Strongly disagree	12	8.0	8.0	100.0
	Total	150	100.0	100.0

 

Table 4.31

Chart 4.31

4.2.14.Question 11: Do you think that organisational practices are aligned with international practices now?

In this question, as company official they were asked that if they think that organisational practices are aligned with international practices now. Only 32% agreed that the present day organisational practices are align with international standards. 57.3% of the employees, however, do not feel the organisational practices align with international standards. Only 10.7% opted to no reply. Tabulated results and graphical representation of the same has been given as under:

Do you think that organisational practices are aligned with international practices now?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	42	28.0	28.0	28.0
	agree	6	4.0	4.0	32.0
	No Reply	16	10.7	10.7	42.7
	Disagree	52	34.7	34.7	77.3
	Strongly disagree	34	22.7	22.7	100.0
	Total	150	100.0	100.0

 

Table 4.32

Chart 4.32

4.2.15.Question 12: Do you agree that now company is regulatory compliant?

In this question, as company official they were asked that if they agree that now company is regulatory compliant. 44% considered that company is compliant with the new regulation whereas 36% do not consider it complaint. A good percentage of 20 (30 respondents) did not reply. This shows an evenly poised situation as to the confidence of the employees in compliant behaviour of the company as against their 80% confidence in safety of Company’s milk (Question 4 of management survey). Tabulated results and graphical representation of the same has been given as under:

Do you agree that now company is regulatory compliant?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	60	40.0	40.0	40.0
	agree	6	4.0	4.0	44.0
	No Reply	30	20.0	20.0	64.0
	Disagree	29	19.3	19.3	83.3
	Strongly disagree	25	16.7	16.7	100.0
	Total	150	100.0	100.0

 

Table 4.33

Chart 4.33

4.2.16.Question 13: Chinese As manager at SanLu, you are trained and skilled?

In this question, as company official they were asked that if they as manager at SanLu, are trained and skilled. 72.7% responded that they are skilled and trained and only 16% found to be untrained and unskilled. Tabulated results and graphical representation of the same has been given as under:

As manager at SanLu, you are trained and skilled?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	55	36.7	36.7	36.7
	Agree	54	36.0	36.0	72.7
	No Reply	2	1.3	1.3	74.0
	Disagree	39	26.0	26.0	100.0
	Total	150	100.0	100.0

 

Table 4.34

Chart 4.34

4.2.17.Question 14: As company official do you believe that there is no more use of melamine or any other artificial chemical in milk production?

In this question, as company official they were asked that if they believe that there is no more use of melamine or any other artificial chemical in milk production. 41.3% response was in agreement that there is no use of any material like melamine whereas 32% believe that there is use of such materials still in the company. Major 26.7% however, did not respond. Tabulated results and graphical representation of the same has been given as under:

As company official do you believe that there is no more use of melamine or any other artificial chemical in milk production?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	47	31.3	31.3	31.3
	agree	15	10.0	10.0	41.3
	No Reply	40	26.7	26.7	68.0
	Disagree	29	19.3	19.3	87.3
	Strongly disagree	19	12.7	12.7	100.0
	Total	150	100.0	100.0

Table 4.35

Chart 4.35

4.2.18.Question 15: Can SanLu be relied in future?

In this question, as company official they were asked that if SanLu can be relied in future.

61.3% responses that yes it can be relied and 15.4% considered that it cannot. Tabulated results and graphical representation of the same has been given as under:

Can SanLu be relied in future?
		Frequency	Percent	Valid Percent	Cumulative Percent
Valid	Strongly Agree	44	29.3	29.3	29.3
	agree	48	32.0	32.0	61.3
	No Reply	35	23.3	23.3	84.7
	Disagree	10	6.7	6.7	91.3
	Strongly disagree	13	8.7	8.7	100.0
	Total	150	100.0	100.0

 

Table 4.36

 

Chart 4.36

4.3.Interviews with Government Officials: Interviews:

In this part, the data consolidated as the result of five interviews with different government officials has been presented. The selection of these officials was stratified and convenience based as the availability of these people was neither sure nor easy. The consolidation is as under:

4.3.1.What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety?

In response of this question, different answers were emerged. It may be found that there are three major areas i.e. remedial measure, corrective measures and restoration of confidence measure. In first area, there were medical and health aspects. In other area, redefinition of regulatory mechanism and revamping of AQSIQ. Lastly, media campaign to restore image of milk industry at central level. In the area of quality control and regulatory mechanism, government had introduced measures like abolition of old methods of milk / food testing and adopted internationally recognised test to create equality. Testing labs were improved and overhauled and area of infancy was expanded to whole country including downtown areas. Company-regulatory body liaison mechanism was defined and on-spot checking was introduced. Severe penal punishments and fines have been introduced at all local and national levels. Other areas are:

• Declaration of emergency situation in affected areas
• Constituting of medical teams and committees for medical response and investigation into the matter
• Provision of funds for medical treatment
• Establishment of central information and response centre
• Banning SanLu and other companies involved in use of melamine in milk.
• Creation of medical find for treatment of affected children
• Compensational measures
• Revamping of regulatory mechanism and inspection of incident through General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)
• Introduction of new quality standards

In food safety, new regulatory bodies were created and empowered. Companies are ceased and new management had taken over. In health there were number of initiatives as it was associated with the team looking for causes of incident and gauging impacts. Other measures were medial and financial intervention and creation of treatment funds. Truly, damage recovery was the most difficult task at that time. 

4.3.2.What is the perception of people in local and international market about Chinese powdered milk now-a day?

In response to this question, it was stated that the impression that emerged soon after melamine incident is under dilution. China has new trade partners in milk industry as Netherlands in Europe. Efforts like introduction of new standards. In the first instance, the government has ensured revamping of its milk industry by providing support for its continuation after melamine and then credits were extended to improvise technology and processes. In the later stages, the official efforts were made to meet international testing criteria that country’s exports meet satisfactorily. There are doubts but with the passage of time these will be removed too. As a functionary of AQSIQ, it can be assured of regulatory control over milk adulteration and use of artificial chemicals in all provinces of the country. The companies have responded well. The improvement in milk production, sales and export have improved over last three years and hope that will remain positive for next one decade to make China a leading country in dairy product production. However, local people still prefer imported milk and are not taking much risk with their children’s lives. International market is moving with its own pace and there are improvements with some regions only.

From quality control, it is gradually improving. It may however, be added that melamine incident has impacted upon the perception of Chinese milk badly and as you must remember that lot of milk and milk products had to call off from the market at that time. This is hard to erase that memory, but gradually, it will be improved.

4.3.3.What efforts have been made to improve the confidence of international exporter of Chinese milk?

In response to this question it was stated that now milk and milk powder produced in the country has to pass international testing before qualifying for import licences. For last seven years, China has assured world community and ensured market forces a fool proof regulatory mechanism that is helping in improvement of confidence of the users in Chinese powder milk. In case of food control and regulatory regime has already been changed and now it is in line with international standards. 

Furthermore, bilateral and multiparty talks have been concluded among government, milk producers, exporters and multinational companies or prospective importers for Chinese milk. Credit facilities and support system has been introduced by the government. To importers, government has assured with guarantees. Government is under further negotiation at government level with Netherland and Portugal. Cadbury has also brought into discussion as government has paid it damages for losses during melamine incident. 

4.3.4.Is there any improvement in perception of international exporters?

The answer of this question is a definite yes. Improvement is recorded as shown from exclusive contract with Netherlands or different multinational companies again like Cadbury. It can be seen in terms of trade volume changing over the period of time. It appears as Chinese milk production has been improved and exports are enhanced. 

4.3.5.How is the present day regulatory mechanism efficient than previous one?

The response to this question was again yes from all. It was found that new regulatory system is efficient in terms of graphical spread as well as the testing applications, technology used and results ensured. It is expanded, coordinated and focused. Multitier regulatory and monitoring system has ensured no malpractice for last few years and in future, it is hoped to work even better. Furthermore, these are intensive, modernised and standardised. These are on-spot and inside units. It cannot be avoided now. It is far superior to older and outdating monitoring mechanism. It is on-sight, updated and advance.  

4.3.6.Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?

In response to this question it was found that to the extent of milk exporting countries, it is a definite yes. There might be problem in small towns; there might be some grey areas. There is a great change noted and in the recent past, there is no known use of any prohibited material in case of milk. It may be summed up that majority has learnt their lesson, if not all. Most players in this industry are new and it can be hoped that there will be melamine like incident in future.  Management had to mend their ways. Melamine has a serious impact upon their business.  

4.3.7.What are the sureties consumers have against profiteers who caused melamine incident?

Chinese government has imposed severe penalties against companies involve and some has to wind up their business with heavy losses. The companies who are still working on production side, these are in constant observation despite seven years from incident. Regulations are strong enough to close any suspected unit without approval from authorities. Rest we, have to believe in our government and safety mechanism. Most of culprits of melamine are now out of business and remaining are under regulatory regime. At present regulatory success is only one guarantee. There is not a single incident like melamine in last seven years. It is the guarantee. Government is ensuring fine milk in market only. 

4.3.8.In future, do you see Chinese milk gaining its position back in international market? If so, how?

In response to regaining Chinese position back, participants are confidant. They see a definite change in next seven to ten years. Had this incident not happened, China could cross USA by today. Though, it is a difficult task, but we can hope and work for that position again.

4.3.9.What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?

The untouched and to be improved areas are employers’ education and training before entry into an industry. Formal and informal knowledge base for entrepreneurs about rules, regulations, their enforcement, setbacks for non-compliance and benefits etc are the areas to work from different angle. Similarly, there is need for state patronising for milk production and improvement of central research laboratories. Executive has supported this industry and in future, this support will be available to all compliant units. However, some areas are left for legislation as director’s liability in such incidents. On part of companies, there is a need of patience to see the change in public perception. Companies have not launched any effective media campaign that is required now.

4.4       Data Analysis:

In this part of the chapter, research objectives are placed as the guiding rule to review the impacts of this research and its conclusion.

4.4.1.               Objective One: To review the impacts of melamine incident, 2008 upon the food safety management in Chinese companies:

This objective is specific to the change in the safety management in the Chinese milk producing companies after the melamine industry. It is evident for literature review that before the melamine incident in 2008, Chinese powder milk was in great demand ion international market and there was an evident future prediction to become a major producer in coming decade. However, the situation was reversed soon after the discovery of use of melamine in milk to defeat prevalent nitrogen tests and resultant deaths; there were bans and withdrawal of international contracts. The booming industry had a nose dive. Many a company went to default and remaining were operating at minimum. At present, a clear change is expected in the management processes as well as management style of these companies.

In the research survey it was observed that according to the employees, the organisation was aware of the use of melamine in the milk thus it was deliberate or shows a criminal silence over the deadly practice (Q 2 Survey 2). But at the same time the management was not trained with the food safety, that shows mushroom growth of milk powder companies had diluted the ethical concerns, too (Q 3 Survey 2) though the results / causalities were not intended (Q 7 Survey 2). For a majority of the respondents, this incident could be avoided (Q 6 Survey 2).

This shows that there was a room for control over the situation by management practices and it is evident by the response of question 8 in the survey where majority agreed that had this incident not happened, there would be no stoppage of use of melamine and this incident has dented Chinese milk companies’ reputation (Q 9 Survey 2). As the matter of management rectification, majority is convinced that management has learnt its lesson. 44% percent believe in lesson is learnt though 21% remained silent (Q 10 Survey 2). But still managerial practices are not aligned with the international practices as 32% considered it as aligned with international practices (Q 11 Survey 2). A simple majority is convinced that now SanLu is now regulatory compliant (44% agreed and 36% agreed) (Q 12 Survey 2). After this incident, now workforce is trained and skilled to perform its functions as food processors as 72% agreed to this statement (Q 13 Survey 2).  Furthermore, a simple majority believes that there is no more use of melamine or like chemical as 41.3% agreed as against 32% disagreed (Q 14 Survey 2) whereas 32.7% of the parent believe in the stoppage of melamine in milk industry (Q 13 Survey 1). Therefore, in majority opinion (61%) SanLu can be relied now. This has another confirmatory result where 54% of the customers’ survey showed confident in present day Chinese powdered milk (Q 4 Survey 1). In opinion of the interviewed participants, in response to question 6, all the participants have agreed that companies have mended their ways and there are bit of issues with the companies operating in small towns only. However, the customers are evenly divided on the question that managements of milk companies have amended their ways or otherwise (Q 6 Survey 1).

This discussion indicates that there are visible changes in the management practices of SanLu after melamine incident, 2008 and the management is now more complaint of national regulations and international standards.

4.4.3    Objective Two: To review the change in Chinese regulations in food industry:

This objective is specific to change in the Chinese food industry’s regulatory regime after melamine incident in 2008. In the interviews with the officials as well as the client survey has discussed this aspect. In the response to the question that what actions were taken by the Chinese government after melamine incident in food safety / regulatory regime, it was responded that there was redefinition of regulatory mechanism and revamping of AQSIQ, company-regulatory body liaison mechanism was defined and on-spot checking was introduced and penal actions were introduced for food adulteration. Besides, there was establishment of central information and response centre for any use of industrial material in food and enforcement of international quality standards in the country. For export, Chinese powder milk is under dual testing and it has to pass EU / US Food Tests before accepting in the international market and continuous acceptance of Chinese milk in international market is an indication of its improved standard. Another, impact of revised regulation is the bilateral and multiparty talks that have been concluded among governments, milk producers, exporters and multinational companies or prospective importers for Chinese milk (Question 5, Interviews) In response to question that present regulatory regime is better than earlier, all the participants of interviews are agreed that it is the case due to testing applications, technology used and results ensured, though parents in survey one are agreed to 34% only that shows users’ discomfort even today (Q 10, Survey 1). Intensive, modernised and standardised has produced its impacts. But still, only 32% of the parents are agreed as against 60% disagreement to prefer Chinese milk over imported one against (Q 8 Survey 1).

In the light of this discussion, it may be seen that Chinese regulatory regime has been improved to satisfy its customers at home at a certain level only and abroad and is helping in nullifying the impacts of melamine incident with gradual process.

4.4.4    Objective Three: To analyse the regulatory situation conducive for promotion of powdered milk industry in the country again:

In the first instance, this call for the review of confidence level of the local customers in the Chinese powder milk and its roots can be traced with the Chinese official response to the incident. 65% of the participants in survey 1 are confident that the Chinese government had responded timely and satisfactorily to the situation created after melamine incident in 2008 ( Q 2 Survey 1). Another 57% has shown confidence in the present day efforts of the government to ensure milk and food safety in the country (Q 4 Survey 1). In case of future of Chinese powder milks in local market, 50% are confident due to reasons disc used above and 42% have doubts (Q 11 Survey 1) and in case of international market it is only 38% against 42% lack of confidence (Q 12 Survey 1). It is important to note that where users are still in doldrums over future market, interviewers are confidant in Chinese industry’s future. Perhaps the difference is the insight knowledge. Is research is further able to identify the areas required to be improved like employers’ education and training before entry into an industry, state patronising for milk production and improvement of central research laboratories, and launch of media campaign by the milk production companies (Q 9, Interviews). International scenario has already been presented in previous section of this chapter. This area of analysis is able to present a hopeful picture for the future of Chinese milk industry in and abroad again.

4.5       Summary of the Chapter:

This chapter has covered data presentation and its analysis with two surveys and one set of interview. In the next chapter conclusion and recommendations have been made.

 

 

CHAPTER FIVE

DATA ANALYSIS, CONCLUSION AND RECOMMENDATIONS

 

 

5.0       Conclusion:

In China, milk industry was once considered as the fastest growing industry of the country and as the result, there was an exponential growth of milk producing companies in the country, however, the absence of any solid regulatory regime and monitory mechanism, malpractices and use of industrial chemicals in production of powdered milk was prompted that eventually resulted in melamine incident. Melamine incident has brought bad name to the country as well as the milk industry and caused many deaths of infants that called for strict and stringent actions from the authorities in both compensational and regulatory areas. Eight years have been passed since the melamine incidents and the Chinese government and companies have made their efforts to recoup the situation. In this research an effort has been made to improve the situation for both local and international markets.

This research sums up the present day situation where overall impression of the customers / parents of the children using powdered milk are mix. Parents are of the opinion that Chinese milk powdered is improved in quality but still preferring imported milk. The confidence in Chinese powdered milk is still very low and the impacts of Chinese government have not been able to impress upon the local customer. On the individual level parents of the children on formula milk, they have endorsed the actions taken by the Chinese government to strengthen the food safety both after the melamine incident as well as in the present time.

At the same time, the survey of the employees / managers of the SanLu Company that was hit hard by the melamine incident in 2008 have clearly indicated that management of the company has improved in processes and management style. About the melamine incident, they believe that could have been avoided if there were more cautious approach by the management and management was aware of the fact that melamine was being added to the milk, though it was not intentional. The management and the employees are now trained in food safety measures and therefore, the chances of melamine like incidents are minimal. The revised standards are more akin to international standards and have been enforced throughout the industry.

SanLu is now a regulatory compliance company and the management is keen to avoid any incident in future. Employees are confident about the future of the industry. Chinese officials have indicated the instances of improved trade with international companies at national and individual levels as the impacts of regulatory regime in China. The employees are confidant than earlier and sure that the Chinese powder milk is safer now and hence the milk produced by the company can be relied. On the country level, the response of Chinese government on the melamine incident was endorsed by all the three categories of the respondents. The regulatory mechanism is strengthened and international standards have been adopted with new tests and technology. The chances of any future melamine like incidents are minimal.

Official have identified the areas those have been worked out and improved by the government and those that are required to be improved in future and these are mainly pertains to informal education of the top leadership about food safety and organisational media campaign to improve the image of the Chinese milk industry at the local level. Chinese government’s efforts are bearing fruits at the international level as there are visible surge in demand of Chinese powder milk in last few years. The future appears bright and the focus is on the international trade instead of local customers that appears grey area in the whole discussion.

5.1       Recommendations:

In the light of above discussion and conclusion, following recommendations can be forwarded:

1. For milk powder production companies:

• In the first instance, there is a need of information campaign to let the local customers aware about the security measures taken after melamine incident. As the starting point, this might be started from the employees and then to the public at large. The survey indicates confusion / unawareness about the steps taken by the company that should not be the case.
• The apprehensions that there might be use of other industrial chemicals in powdered milk production at least in small towns might be addressed by the solid declarations and commitments to the otherwise. Unconditional declarations may be got published in national newspapers.
• Steps taken to provide health and financial care of melamine incident may be highlighted.
• A commercial milk research centre may be introduced that may be established with the collective efforts of all the companies.
• Companies’ internal testing must comply with international tests and procedures.

2.  For Chinese Government:

• Besides strengthen of Administration of Quality Supervision, Inspection and Quarantine, there must be a dedicated regulatory mechanism for milk industry only with countrywide integration and coverage of all towns, small or big.
•  Regular and periodic inspection of sites by independent quality managers, preferably international companies will help in improvement in the situation.

 

 

 

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Annexure A

(Questionnaire to be filled by the parent whose child is under age of five and use Formula powdered milk)

Part 1: Personal information (optional):

This information will not be shared with anyone and it is optional for the participants to reply.

 

• Name

• Age

20-25

26-35

36-50

Over 50

 

• Gender

Male

female

• Age of the child using powdered milk

1 year

1-3 years

3-5 years

 

Survey question:

Sr #	Statements	Scale
		Strongly Agree	Agree	No reply	Disagreed		Strongly disagreed
1	Were you aware of melamine incident?
2	Do you think that official response of the government during melamine incident was rational and correct?
3	As a parent, are you using Chinese powdered / formula milk for your child, frequently or occasionally?
4	As a parent, do you think that Chinese powdered / formula milk is now safe for your child?
5	As a parent, do you think that Chinese intervention to ensure milk safety after melamine incident is adequate?
6	As a parent, do you think that milk producing companies in the country have mended their ways after new regulatory measures?
7	Are you aware of regulatory measures taken by the governments at different level?
8	As a parent, do you think that Chinese milk is safer than imported milk powders?
9	Do you think that melamine incident has dented Chinese reputation in the international market?
10	As a parent, do you think that present official regulatory regime is providing enough security to you to prefer Chinese powdered milk over imported milk?
11	Do you see future of Chinese powdered milk bright in local market?
12	Do you see future of Chinese powdered milk bright in international markets?
13	As a parent, in your opinion, the use of melamine has been stopped in local production of milk?
14	As a parent, do you think that official response to the affected people in melamine incident was fair in terms of medical facilities and compensations?
15	Will you prefer Chinese milk for your child?

 

 

 

Annexure B

(Questionnaire to be filled by mangers at SanLu)

Part 1: Personal information (optional):

This information will not be shared with anyone and it is optional for the participants to reply.

• Name

• Age

Under 20

21-35

36-50

Over 50

 

• Gender

Male

female

• Management level of Engagement:

Top

Middle

Lower

 

Survey question:

Sr #	Statements	Scale
		Strongly Agree	Agree	No reply	Disagreed		Strongly disagreed
1	Were you aware of melamine incident?
2	Do you think that organisation was aware of the use of melamine?
3	Were the management trained to ensure food safety?
4	As company official, do you think that Chinese powdered / formula milk is now safe for children?
5	As company official, do you think that Chinese intervention to ensure milk safety after melamine incident is adequate?
6	Do you believe that melamine incident can be avoided?
7	As company official do you believe that use of melamine as deliberate?
8	As company official do you believe that had this incident was not happened, the use of melamine would not be stopped?
9	Do you think that melamine incident has dented Company’s in the international market?
10	Has the management learnt its lesson?
11	Do you think that organisational practices are aligned with international practices now?
12	Do you agree that now company is regulatory compliant?
13	As manager at SanLu, you are trained and skilled?
14	As company official do you believe that there is no more use of melamine or any other artificial chemical in milk production?
15	Can SanLu be relied in future?

 

 

 

 

Annexure C

(Interviews with government officials dealing with policy formulation and implementation of food safety after melamine incident)

1. What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety? Please list.
2. What is the perception of people in local and international market about Chinese powdered milk now-a day?
3. What efforts have been made to improve the confidence of international exporter of Chinese milk?
4. Is there any improvement in perception of international exporters?
5. How is the present day regulatory mechanism efficient than previous one?
6. Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?
7. What are the sureties consumers have against profiteers who caused melamine incident?
8.   In future, do you see Chinese milk gaining its position back in international market? If so, how?
9. What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?
10. Any other opinion, please.

 

 

Annexure D

Transcript of Interviews with government officials dealing with policy formulation and implementation of food safety after melamine incident

(Note: All names and indications used are not real)

(First Interview)

Interview with Mr. Li; an executive in General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)

11. What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety? Please list.

Mr. Li: These are many. To list these were:

• Declaration of emergency situation in affected areas
• Constituting of medical teams and committees for medical response and investigation into the matter
• Provision of funds for medical treatment
• Establishment of central information and response centre
• Banning SanLu and other companies involved in use of melamine in milk.
• Creation of medical find for treatment of affected children
• Compensational measures
• Revamping of regulatory mechanism and inspection of incident through General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)
• Introduction of new quality standards

12. What is the perception of people in local and international market about Chinese powdered milk now-a day?

Mr. Li: The impression that emerged soon after melamine incident is under dilution. China has new trade partners in milk industry as Netherlands in Europe. Efforts like introduction of new standards. In the first instance, the government has ensured revamping of its milk industry by providing support for its continuation after melamine and then credits were extended to improvise technology and processes. In the later stages, the official efforts were made to meet international testing criteria that country’s exports meet satisfactorily. There are doubts but with the passage of time these will be removed too. As a functionary of AQSIQ, I can assure you of regulatory control over milk adulteration and use of artificial chemicals in all provinces of the country. The companies have responded well. The improvement in milk production, sales and export have improved over last three years and hope that will remain positive for net one decade to make China a leading country in dairy product production.

13. What efforts have been made to improve the confidence of international exporter of Chinese milk?

Mr. Li: As said earlier, now milk and milk powder produced in the country has to pass international testing before qualifying for import licences. For last seven years, China has assured world community and ensured market forces a fool proof regulatory mechanism that is helping in improvement of confidence of the users in Chinese powder milk.

14. Is there any improvement in perception of international exporters?

Mr. Li: Yes, definitely as shown from exclusive contract with Netherlands or different multinational companies again.

15. How is the present day regulatory mechanism efficient than previous one?

Mr. Li: Yes, it is efficient in terms of graphical spread as well as the testing applications, technology used and results ensured.

16. Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?

Mr. Li: To the extent of milk exporting countries, it is a definite yes. There might be problem in small towns; there might be some grey areas.

17. What are the sureties consumers have against profiteers who caused melamine incident?

Mr. LI: Chinese government has imposed severe penalties against companies involve and some has to wind up their business with heavy losses. The companies who are still working on production side, these are in constant observation despite seven years from incident. Regulations are strong enough to close any suspected unit without approval from authorities. Rest we, have to believe in our government and safety mechanism.

18. In future, do you see Chinese milk gaining its position back in international market? If so, how?

Mr. Li: Yes, definitely in next seven to ten years, China will be in forefront. Had this incident not happened, China could cross USA by today.

19. What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?

Mr. Li: Employers’ education and training before entry into an industry. Formal and informal knowledge base for entrepreneurs about rules, regulations, their enforcement, setbacks for non-compliance and benefits etc are the areas to work from different angle.

20. Any other opinion, please.

Mr. Li: Just one thing, Chinese milk is safe now.

 

 

(Second Interview)

Interview with Mr. Wang, An Assistance at Food Quality Control Lab in Beijing

1. What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety? Please list.

Mr. Wang: In the area of quality control and regulatory mechanism, government had introduced measures like abolition of old methods of milk / food testing and adopted internationally recognised test to create equality. Testing labs were improved and overhauled and area of infancy was expanded to whole country including downtown areas. Company-regulatory body liaison mechanism was defined and on-spot checking was introduced. Severe penal punishments and fines have been introduced at all local and national levels.

2. What is the perception of people in local and international market about Chinese powdered milk now-a day?

Mr. Wang: From quality control, it is gradually improving. It may however, be added that melamine incident has impacted upon the perception of Chinese milk badly and as you must remember that lot of milk and milk products had to call off from the market at that time. This is hard to erase that memory, but gradually, it will be improved.

3. What efforts have been made to improve the confidence of international exporter of Chinese milk?

Mr. Yang: It has already been said that food control and regulatory regime has already been changed and now it is in line with international standards. 

4. Is there any improvement in perception of international exporters?

Mr. Wang: I can see in terms of trade volume changing over the period of time.

5. How is the present day regulatory mechanism efficient than previous one?

Mr. Wang: It is expanded, coordinated and focused. Multitier regulatory and monitoring system has ensured no malpractice for last few years and in future, it is hoped to work even better.

6. Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?

Mr. Wang: To me there is a great change. At least, there is no known use of any prohibited material in case of milk.

7. What are the sureties consumers have against profiteers who caused melamine incident?

Mr. Wang: Most of them are now out of business and remaining are under regulatory regime.

8. In future, do you see Chinese milk gaining its position back in international market? If so, how?

Mr. Wang: It is a difficult task, but we can hope and work for that position again.

9. What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?

Mr. Wang: State patronising for milk production and improvement of central  research laboratories.

10. Any other opinion, please.

Mr. Wang: No, thanks.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Third Interview)

Interview with Ms. Sha, An Advisor on Food and Health Issues, Beijing

1. What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety? Please list.

Ms. Sha: There are three major areas i.e. remedial measure, corrective measures and restoration of confidence measure. In first area, there were medical and health aspects. In other area, redefinition of regulatory mechanism and revamping of AQSIQ. Lastly, media campaign to restore image of milk industry at central level.

2. What is the perception of people in local and international market about Chinese powdered milk now-a day?

Ms. Sha: improved but not very positive. People still prefer imported milk and are not taking much risk with their children’s lives. International market is moving with its own pace and there are improvements with some regions only.

3. What efforts have been made to improve the confidence of international exporter of Chinese milk?

Ms. Sha: Bilateral and multiparty talks have been concluded among government, milk producers, exporters and multinational companies or prospective importers for Chinese milk. Credit facilities and support system has been introduced by the government. To importers, government has assured with guarantees.

4. Is there any improvement in perception of international exporters?

Ms. Sha: Broadly yes.

5. How is the present day regulatory mechanism efficient than previous one?

Ms. Sha: we have seen it working for good change and hope that it will provide requisite assurances to all stakeholders.

6. Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?

Ms. Sha: Not all, but majority has learnt their lesson. Most players in this industry are new and it can be hoped that there will be melamine like incident in future. 

7. What are the sureties consumers have against profiteers who caused melamine incident?

Ms. Sha: Regulatory success is only one guarantee.

8. In future, do you see Chinese milk gaining its position back in international market? If so, how?

Ms. Sha: I am very hopeful with the recent developments and in few years down the road there will be improvement.

9. What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?

Ms. Sha: Government is already on it. Executive has supported this industry and in future, this support will be available to all compliant units.

10. Any other opinion, please.

Ms. Sha: thanks.

 

 

 

(Fourth Interview)

Interview with Mr. Owne, A Coordinator between milk production companies and the government at Beijing

1. What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety? Please list.

Mr. Owne: In food safety, new regulatory bodies were created and empowered. Companies are ceased and new management had taken over. 

2. What is the perception of people in local and international market about Chinese powdered milk now-a day?

Mr. Owne: Improving gradually and will be restored.

3. What efforts have been made to improve the confidence of international exporter of Chinese milk?

Mr. Owne: government is under negotiation at government level with Netherland and Portugal. Cadbury has also brought into discussion as government has paid it damages for losses during melamine incident. 

4. Is there any improvement in perception of international exporters?

Mr. Owne: I can see the improvements on economic board. 

5. How is the present day regulatory mechanism efficient than previous one?

Mr. Owne: It is far superior to older and outdating monitoring mechanism. It is on-sight, updated and advance. 

6. Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?

Mr. Owne: yes there are clear cases of new thinking in managements. These are imporved. 

7. What are the sureties consumers have against profiteers who caused melamine incident?

Mr. Owne: there is not a single incident like melamine in last seven years. It is the guarantee.

8. In future, do you see Chinese milk gaining its position back in international market? If so, how?

Mr. Owne: we are hopeful.

9. What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?

Mr. Owne: Some areas are left for legislation as director’s liability in such incidents.

10. Any other opinion, please.

Mr. Owne: there is a need of patience to see the change in public perception. Companies have not launched any effective media campaign that is required now.

 

 

 

(Fifth Interview)

Interview with Mr. Key, An Officer in Ministry of Health

1. What specific measures has the Chinese government taken soon after melamine incident to cover damages done, especially for food safety? Please list.

Mr. Key: In health there were number of initiatives as i was associated with the team looking for causes of incident and gauging impacts. Other measures were medial and financial intervention and creation of treatment funds. Truly, damage recovery was the most difficult task at that time. 

2. What is the perception of people in local and international market about Chinese powdered milk now-a day?

Mr. Key: Not as bad as it was at the time of incident. It is improving with every passing day.

3. What efforts have been made to improve the confidence of international exporter of Chinese milk?

Mr. Key: I am sorry, but I have no knowledge about it.

4. Is there any improvement in perception of international exporters?

Mr. Key: It appears as our milk production has been improved and exports are enhanced. 

5. How is the present day regulatory mechanism efficient than previous one?

Mr. Key: Yes, of Course, these are intensive, modernised and standardised. These are on-spot and inside units. It cannot be avoided now. 

6. Do you think that companies have mended their ways and there will be no future incident like melamine due to greedy practices?

Mr. Key: They had to. Melamine has a serious impact upon their business.  

7. What are the sureties consumers have against profiteers who caused melamine incident?

Mr. Key: Government ensures fine milk in market only. 

8. In future, do you see Chinese milk gaining its position back in international market? If so, how?

Mr. Key: Yes.  

9. What are the areas, where Chinese government is still to work to improve consumer confidence and industry’s image?

Mr. Key: I think, now it is for the industry to move forward. Government has provided support in last five years and it is up to the export companies to get contracts to earn profits.

10. Any other opinion, please.

Mr. Key: Thanks.