The century-old Japanese dairy enterprise, Meiji Milk, has been found with traces of veterinary drugs, and the repercussions of this incident continue to escalate. On November 11, while the domestic market was immersed in the shopping frenzy of “Double 11,” Meiji urgently recalled 45,000 bottles of milk across the strait in Japan. The recall did not explicitly mention the Chinese market, leading many domestic consumers to be skeptical of the statement issued by Meiji (China) Investment Co., Ltd.
In recent years, Meiji has been increasing its investment in China, establishing factories in various locations and acquiring upstream milk sources to expand its market share in products such as ice cream and milk. Compounded by a trust crisis and intensified competition in the domestic dairy industry, the path of Japanese dairy enterprises, with Meiji Milk as a representative, in China has been quite tumultuous.
Emergency Recall of 45,000 Bottles of Milk
“Fortunately, I’ve never liked Japanese products.” “There are many good milk brands domestically, why choose Japanese ones?” As of 7:30 p.m. on November 12, after a day of fermentation, the topic of “Meiji Milk found with veterinary drug residues” was still trending on Weibo, with over 17 million reads on that day.
According to a report by Japan’s NHK on November 11, Meiji stated that the decision to recall about 45,000 bottles of milk was due to the detection of veterinary drug residues used for preventing infectious diseases in cows in the milk designated for distribution. The company claimed that there is currently no evidence proving that the residue of sulfamethazine, the detected substance, poses a significant risk to human health. The contaminated milk was produced by Meiji Dairy located in Kaizuka City, Osaka Prefecture, mainly in 180ml bottles for home delivery. However, as the shelf life of these problematic products expires on November 13, they have already been distributed in various regions of western and central Japan.
The culprit for this forced recall of Meiji Milk is “veterinary drugs.” According to a report by Japan Broadcasting Corporation on November 11, the detected veterinary drug residue is sulfamethazine, commonly used for the prevention or treatment of infections in cattle or pigs. As this substance can remain in milk and have adverse effects on the human body, according to safety production regulations, it should not be used on animals within 72 hours before milking.
In contrast to Meiji’s emergency recall in Japan, its domestic subsidiary issued a statement to clarify. On November 11, Meiji (China) Investment Co., Ltd. posted a statement on its official website, stating, “After verification, Meiji China confirms that the implicated products are only supplied to the Japanese market and do not involve the Chinese market. Currently, all products made with raw milk sourced in China, which Meiji China sells in China, strictly adhere to Chinese laws and regulations throughout the entire process, from procurement to processing, packaging, and distribution, all following rigorous quality management.”
On November 12, when asked about the potential impact on the Chinese market and specific information about domestic milk sources, the response was that they currently cannot publicly disclose such information and repeatedly emphasized, “Meiji’s milk and other products sold in China are all produced in domestic factories, and the milk sources used are all from domestic ranches.”
A screenshot from Meiji’s official website reads, “Domestic milk source, enjoy with confidence.” Some netizens expressed strong reactions, stating that they no longer trust Meiji and sarcastically remarking, “Thought Japan only had nuclear pollution, turns out they also have veterinary drugs.”
Increased Investment in China
As a century-old Japanese dairy enterprise, Meiji has been in the domestic market for over 26 years. While its milk powder exited China in 2013, other products still belong to niche brands.
Starting from 2019, Meiji Dairy increased its investment in China, including a ¥1.45 billion investment in expanding and transforming its Suzhou factory, establishing its first factory in the northern region in Tianjin in September 2019, constructing a new factory in southern China in July 2020, and acquiring a 25% stake in Aoyu Ranch to supplement its milk sources. In November 2020, Meiji announced a ¥650 million capital increase for Meiji Seika Food Industry (Shanghai) Co., Ltd. (hereinafter referred to as “Meiji Seika Shanghai”), to establish a new production base for ice cream and expand its market share in this business in China.
With such substantial investments, Meiji appears confident in the Chinese market. In May 2023, Meiji Holdings announced its financial results for the fiscal year ending March 2023, with revenues from its Chinese operations reaching ¥21.4 billion (approximately ¥1.1 billion), a slight 2% increase year-on-year when converted to renminbi. It is projected that sales revenue in China for the new fiscal year will grow by 36% to ¥29.8 billion (approximately ¥15.38 billion).
However, according to information obtained from Credit China, Meiji Seika Shanghai had three administrative penalty records from 2018 to 2021, including a fine of ¥20,000 imposed by the Songjiang District Water Affairs Bureau on May 19, 2021, for illegal sewage discharge in Shanghai, and a corrective order from the Songjiang District Ecology and Environment Bureau on August 26, 2021, for violating air pollution prevention and control regulations.
After the “nuclear leakage” and “nuclear-contaminated water” incidents, consumer confidence in Japanese companies in China has remained low. Even before the first round of radioactive water discharge by Japan a few months ago, many netizens questioned, “Can we still drink Meiji?” Prior to this, in 2000, the “Snow Brand” in Japan exposed a food safety scandal. The factory added expired milk to raw materials for reproduction, resulting in a massive contamination of dairy products, leading to the most severe collective poisoning incident in Japan in half a century. After that, China temporarily banned the import of Snow Brand dairy products from Japan.
Why Japanese Dairy Companies Frequently Retreat
At the recently concluded Shanghai Import Expo, Mengniu, Yili, and Ausnutria showcased their achievements in overseas markets. For instance, Ausnutria’s Jabeat leads the global goat milk powder industry, achieving revenue of ¥3.591 billion in 2022, with a staggering 21.8% growth in revenue from overseas markets such as Europe, the United States, the Middle East, and Mexico.
On one side, domestic dairy companies are gaining increasing influence in overseas markets, while on the other side, Japanese imported milk powder faces repeated setbacks. Since 2010, Japan has faced consecutive outbreaks of foot-and-mouth disease and nuclear leakage incidents, causing China to temporarily halt the import of Japanese milk powder. Public confidence in Japanese food has greatly diminished, leading companies like Meiji, Wako, and Morinaga to gradually withdraw from the Chinese infant formula market.
Simultaneously, national standards are becoming increasingly stringent, raising the threshold for foreign factories entering China. The revised “Administrative Measures for the Registration of Formulas for Infant Formula Milk Powder Products” issued by the State Administration for Market Regulation has been implemented since October 1 of this year. Currently, many overseas factories have not yet obtained the second formula registration qualification. According to incomplete statistics, as of the end of June 2023, the State Administration for Market Regulation has approved 749 formula products from 107 factories through registration, with 19 of them being overseas factories, accounting for less than 15% of the total formula products.
In the chilled milk market, Japanese dairy companies are also frequently retreating. In May 2006, Asahi Group, along with Sumitomo Chemical and Itochu, invested ¥1.5 billion to establish Shandong Asahi Green Source Agricultural Technology Co., Ltd. (hereinafter referred to as “Asahi Green Source”). Operating under the Japanese circular agriculture model, its milk prices were more than twice that of domestic high-end products. Asahi Green Source expected to turn a profit around 2011, but it remained deeply in the red until the end of 2015. In December 2016, Asahi Group transferred 100% equity of Asahi Green Source Agriculture and Asahi Green Source Dairy to New Hope Dairy at a price of ¥82.5756 million. Since then, the “Vitagen” milk has become a Chinese brand.
Song Liang, a dairy industry analyst, stated, “The situation of residues of ‘veterinary drugs’ is that, in the breeding process, if cows get sick, antibiotics are used, and if they are not processed in milk products but used as raw materials for production.”
This is not the first time Meiji has recalled products. In December 2011, Meiji Milk Powder in Japan announced the detection of radioactive cesium in the production and sale of milk powder, leading to the recall of 400,000 cans in Japan for free replacement. However, the free replacement plan did not include the Chinese market, as all Meiji milk powder sold domestically was sourced from Australia, with no connection to Japanese sources.
Song Liang further stated, “Although the ‘veterinary drug’ incident will have a certain impact on the Meiji brand’s reputation, it will not affect consumers who buy Meiji brand products. In East China, especially in the Shanghai area, many people recognize Meiji, and it still has some loyal fans in China, with high brand loyalty.”
Regarding specific information about domestic milk sources, etc., as of the time of writing, the Beijing Business Daily reporter has not received a response to the interview letter sent by email to Meiji (China) Investment Co., Ltd.