PRODUCT CONTAMINATION AND THE FOOD & BEVERAGE INDUSTRY IN CHINA
The food and beverage industry in China has been no stranger to product contamination issues in recent
years. These cases affect a wide variety of companies and can – and have – negatively impacted reputations
in both the domestic and international markets. Recently, products as diverse as pet food, drink containers,
baby formula, fresh fruits and vegetables, dumplings, and vitamins have fallen victim to contamination in
In this edition of the China Risks Watch, we define different types of product contamination, examine how they
can occur, and give advice on how to prevent, prepare, respond and recover from a contamination incident.
Product contamination – What is it?
Broadly speaking, there are three categories of product contamination – accidental, intentional, and due to
poor oversight and lack of controls in the supply chain. This third factor was pivotal in 2007 when the toy
industry was shaken to the core by recalls relating to the use of lead-based paint. In the food and beverage
industry, the milk powder incident is another case of poor controls in the supply chain.
How does it occur?
In China, intentional contamination is typically by an aggrieved individual who takes advantage of a weakness
in factory or supply chain security. Take, for example, two large international companies both producing
frozen food products in different parts of China.
In the case of Company A, customers began calling the company’s hotline number and complaining about the
smell and taste of their packaged food. Company records indicated that the batches all came from the same
south China facility and were produced within days of each other. The customer service manager followed
appropriate procedures, halting work at the facility until an investigation into the matter was complete. The
investigation determined that the problem was accidental. The meat mincing machines had a design flaw
which trapped meat inside the machines in a place that was untouched during the cleaning process. Company
A quickly adapted cleaning procedures and was able to minimise reputational damage to the company.
While Company B’s case was not accidental, due to their security measures
they were able to prevent the contaminated products from going to market. RELATED LINKS
One of the last stops along the production line in Company B’s factory was a
metal detector, which indicated the presence of metal contaminates in the Recent
finished foodstuffs. Checks on the production line proved that the metal found publications
in the food had not come from the production machines and the only other Corruption, Compliance
feasible option was that an employee had deliberately inserted them. This and Change. A Control
prompted management to increase security at the factory and require all Risks report
workers to go through metal detectors before entering the production floor.
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How can product contamination be prevented? magnifying glass for
The first step in preventing product contamination is to conduct a threat and
risk assessment that identifies intent, capability and opportunity for accidental
or malicious acts of contamination. In particular, food producers should have a
system to monitor employee issues and concerns, and track consumer
hotlines for any indication that individuals or groups have motivation to cause
Hong Kong Office
harm to your brand and product. John Tan, an Associate with Keller and
Heckman LLP argues that due diligence on supply chain partners is essential
in the China market. “We have seen clients sign contracts to purchase food grade ingredients, only to
discover that their supplier was only licensed to sell industrial grade material. This is one area where China’s
new regulatory systems can be used offensively, giving you the legal basis to require more information from
potential suppliers.” Management must also be proactive in restricting the access and availability of potential
contaminants, by banning potential contaminants, and enforcing rigorous security and control procedures –
similar to Company B’s measure which requires employees to pass through metal detectors before entering
the production floor.
The second step is to conduct a rigorous security
assessment of the production facility and supply chain.
When looking at a typical food production facility, Control
Risks regularly reviews the following:
Restricted access to production line reject and excess
Site access control (for employees and visitors)
Production and post production area security
Provision of appropriate uniforms for production/
Implementation and compliance with personal hygiene
Quality control contamination incident records and
Responding to a product contamination incident
The first priority when responding to a product contamination threat or actual incident is always the health and
safety of consumers and employees. Additional concerns will be the protection of reputation and the
resumption of normal business operations. A crisis management plan implemented by a well-trained
leadership and co-ordination team is essential.
Based on many of the cases Control Risks has dealt with, the initial challenge will be making decisions in
short timeframes when you do not have all the necessary information. Applying a simple decision making
protocol will help you to quickly separate facts from assumptions, outline response requirements, identify
worst case scenarios and develop key messages for a range of stakeholders, including media, regulators,
victims, consumers, employees and senior management. It is critical to immediately begin an examination of
the incident and to protect and preserve evidence that may assist law enforcement with any subsequent
inquiries. John Tan notes that for the food industry, best practice is to maintain records allowing you to track
forward and back from any specific lot of raw materials – this is also required by China’s new Food Safety
In planning your response to a contamination incident, consider the following:
Encourage a workplace culture that reports potential incidents and threats, and a consumer hotline
that records and tracks potential incidents
Develop a recall plan and test it annually
Conduct simulated incidents that test the skills and knowledge of a crisis management team
Develop a stakeholder management and communication plan to use in the event of an incident
Conduct an annual risk and threat assessment and security review of facilities
Know your employees and partners in the supply chain.
Develop a good relationship with the relevant authorities at the local level – Administration of Quality
Supervision, Inspection and Quarantine (AQSIQ), the Ministry of Health, State Food and Drug
Administration (SFDA), etc.
John Tan believes this last point is particularly important. “I cannot overemphasise the importance of
maintaining good relationships with the local regulatory authorities. The new Food Safety Law has recall
provisions that are potentially very onerous, but which allow for a great deal of flexibility in enforcement. We
have seen clients obtain very good outcomes in handling recalls based in large part on their management of
the recall. Their relationships with local regulators were definitely a major part of their response.”
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The Guangzhou-Dongguan-Shenzhen corridor area
(Guangdong province), and border areas with
Indo-China (far south-west), the Russian far-east
(north-east) and Central Asia (north-west)
Xinjiang Uighur Autonomous Region (XUAR)
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