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In 2008, a widespread food safety breach tragedy occurred in China. This was known as Sanlu's melamine-tainted Milk Crisis in China. The scandal was involving milk and infant formula as well as other food products that were contaminated with toxic melamine. Although many companies were involved in the crisis, the Sanlu Group was the main company was in the limelight of the scandal. More than 50,000 infants and children were diagnosed to be contaminated with melamine and were treated. Four of these children contracted kidney stone complications which eventually led to renal failure. All of these children were said to have consumed milk products produced by the Sanlu Group.
Jiangyong Lu; Zhigang Tao; Claudia H. L. Woo
Harvard Business Review (HKU837-PDF-ENG)
June 11, 2009
Case questions answered:
- In a narrative format, summarize the key facts and issues of the case.
- Update the information in the case by researching it on the Internet. Focus your response on the specific issues in the case.
- What steps should Fonterra have taken to prevent the crisis? Why?
- What is the responsibility of a company, such as Fonterra or BP, in controlling the actions of suppliers and sub-contractors?
- Assume that you are the Chief Ethics Officer for Fonterra. How do you rebuild the trust and reputation of the company?
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Case answers for Sanlu's Melamine-Tainted Milk Crisis in China
In a narrative format, summarize the key facts and issues of the case “Sanlu’s melamine-tainted Milk Crisis in China”.
In 2008, a widespread food safety breach tragedy occurred in China. This was the Sanlu’s melamine-tainted Milk Crisis. The scandal was involving milk and infant formula as well as other food products that were contaminated with toxic melamine. The Sanlu Group was the main company involved in the crisis, even though there were many more others. Around 54, 000 infants and children were treated, and four of them succumbed to kidney stone complications and renal failure (Crandall, Parnell, & Spillan, 2014, p. 32). These infants had one thing in common; milk products produced by Sanlu Group fed them.
Sanlu Group was a company based in China that was producing the baby formula. Some months before the first infant got sick, the company had discovered that the milk ingredient they were using had melamine content. However, they continued producing the milk without informing the public or its customer base of the dangers associated with the same. Sanlu Group had a middle supplier from whom they purchased their products. The suppliers involved in the crisis would buy the milk and then add water and melamine to increase the bulk of the milk for sale. Melamine was added to improve the protein level in the milk.
Melamine, often used for laminate production, is not safe for human consumption. Their use in milk production resulted in the deaths and illnesses of many children in China. The World Health Organization alerted the public about using milk produced by Sanlu Group. As a result, the importation of milk products from China was banned by Asian and EU countries. However, Sanlu Groups denied the allegations stating that its milk products were safe and met the industry standards. Their partner, Fonterra did an independent study on milk supply and realized that the milk was contaminated with Melamine.
Update the information in the case by researching it on the Internet. Focus your response on the specific issues in the case.
The Melamine Milk Crisis was a wake-up call among the consumers. Many people started questioning the safety of the foods they were consuming. At the same time, business practices, particularly among Chinese companies came under question (Crandall, Parnell, & Spillan, 2014, p. 76). The general public, in particular, lost confidence in the Chinese food chain. Many of them began looking for alternative manufacturers for their food products apart from Chinese business corporations.
In the wake of this scandal, it was realized that there were numerous companies involved in the crisis, not only the Sanlu Group. Around one out of five companies that were producing milk and milk products were adding melamine, consequently contaminating it and rendering it unsafe for human consumption (Crandall, Parnell, & Spillan, 2014, p. 91).
Further research also indicates that some of the top leadership of these organizations and some of the government officials were aware of the incident but failed to inform the public. This was due to the fear of negative publicity at a time when the country was hosting the summer Olympics.
About the crisis, many people were arrested. For instance, the top leadership of Sanlu Group along with some officials of the government who had a clue of what was going on but failed to send an alarm. The loss of consumer confidence in the Sanlu Group and its products and other companies that produced milk products made their reputation…
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