Thursday, February 7, 2008

Poisoned dumplings kill $500m merger

BEIJING - A shipment of poisoned Chinese-made pork dumplings - bite-sized, meat-filled snacks known as gyoza in Japan - has dished up one of the most far-reaching culinary quandaries of recent times, with a US$500 million corporate merger between Nissin Food Products Co and Japan Tobacco among the victims.

The dumpling disaster, which set off a health panic among Japanese consumers, has also taken a bite out of bilateral business, refocused concerns about China's food-safety standards and upset the historically fragile China-Japan trade dynamic.

To date, local media have reported several thousands of people visiting Japanese hospitals with stomach complaints, including a 10-year-old girl in a serious condition. Ten victims of dumpling-induced illness were confirmed by Thursday. Japanese police are investigating allegations of a link between the dumplings, imported from China by Japan Tobacco, and the illnesses.

The dumplings originated from Tianyang Food Plant, located in Shijiazhuang city, southwest of Beijing. Tianyang is a unit of state-owned Hebei Food Import & Export Group, an exporter of frozen and processed meats and freeze-dried vegetables.

In response to the spate of illnesses, Japan's Foreign Minister Masahiko Komura said on February 1 that the food scare could damage Japan-China ties. Japanese corporations Maruha, Ajinomoto and Japan Tobacco recalled products supplied by Tianyang last week.

Exacerbating the dumpling "disaster" are swirling allegations about China's sub-standard hygiene practices, specifically related to two Chinese businesses charged in recent days by a US federal grand jury in connection with imported pet food ingredients that may have killed thousands of cats and dogs last year.

Tensions simmered further when Japan's Health Minister Yoichi Masuzoe told media on February 6 that the dumplings had been deliberately contaminated with pesticide and that police are treating it as attempted murder. Subsequent tests revealed that two toxic pesticides - dichlorvos and methamidophos - were found in the dumplings' dough and fillings.

Later, the public admission from Wei Chuanzhong, Chinese vice minister of the General Administration of Quality Supervision, Inspection and Quarantine, that "a small group that does not wish for the development of Sino-Japanese friendship may have taken extreme measures", set off allegations of conspiracy from netizens and columnists in both countries.

Even so, a joint inspection team has now called the likelihood of the pesticides being added at the Tianynag factory "extremely small", describing the factory as "clean and well-managed" and adding that it is not clear whether the pesticides were added in China or after they were imported to Japan.

So, with Tokyo and Beijing calling for calm and promising increased cooperation in the ongoing inquiry, economic analysts are discussing the scare in terms of corporate finance rather than food safety.

On the sidelines of the dumpling crisis, Nissin Food dropped its plan to merge with Japan Tobacco, citing concerns about the cigarette makers' ties to the contaminated Chinese products.

Japan Tobacco, the world's third-largest cigarette maker, missed out on a chance to sell 49% of its subsidiary Katokichi Co to instant-noodle maker Nissin Food in exchange for combining their frozen-food units, acccording to statements from the three companies released to the Tokyo Stock Exchange on February 6.

"The retreat from the merger is a blow to Japan Tobacco's plan to expand food sales and reduce its reliance on revenue from cigarettes in Japan, where the percentage of men that smoke has fallen by half during the past 40 years," according to Bloomberg news service.

Nissin Food president Koki Ando told reporters that the company wanted a controlling stake in Katokichi but disagreed with Japan Tobacco on the food safety issue. Ando went on to say that the entire food industry has been affected by the "scandal" and had led to apprehension among consumers.

"The dissolution of the food units' merger is disappointing news for both Nissin and Japan Tobacco,'' Yasuhiro Matsumoto, an analyst at Shinsei Securities Co in Tokyo, told Bloomberg. "The merger would have been a win-win proposition for both.''

Industry reports said that Tokyo-based Japan Tobacco, the maker of Camel cigarettes, agreed to buy frozen-food maker Katokichi for 109 billion yen ($1 billion) in November. Annual frozen-food revenue at Katokichi, which in 2006 sold 196 billion yen of noodles, dumplings and other products, were expected to rise to about 260 billion yen when combined with the units from Japan Tobacco and Osaka-based Nissin.

The cigarette maker will keep its frozen food business, Japan Tobacco president Hiroshi Kimura said at a briefing, adding he has no plans to resign. He also warned that the dumpling affair will have an even wider impact.

"It's highly negative event for Japan Tobacco as their corporate governance and risk management will be called into question,'' said Junko Miyakawa, a senior analyst at Shinsei Securities Co, told Bloomberg. "The revenue of food companies will fall. The fallout will not end within two or three months.''

(Asia Pulse, with additional reporting by Asia Times Online.)

(emphasis mine)


Gerald said...

Countries need to set up standards that can oversee various products whether these products are clothes, toys, or food. Safe products will earn countries billions of dollars.

Gerald said...

I am an American but I will buy a foreign product that is safer, cheaper, and good quality. I believe in free and fair competition and whoever produces a better product should reap the benefits. With Nazi America's slave wages we must shop smarter for our hard earned pennies.

capt said...

I used to ALWAYS buy "made in the USA" stuff. You can't even find the sticker anymore.

I try to buy local if possible. I make an effort to support local businesses. I also have a few things I can only get overseas, the weak dollar has me waiting for now.

The safety of imported foods and drugs is paramount and can only be achieved through regulation, control and testing. Trust but verify.

The Chinese knew darn well they had lead in the paint - it is an additive. That shows a willingness to poison us and our children.

The part that really struck me was the :

"a small group that does not wish for the development of Sino-Japanese friendship may have taken extreme measures"

THAT more than anything demands some very tight control. We can't get the stuff on the cheap the way we have been getting it without a risk of exposure.

Gerald said...

It seems that to buy American is becoming more and more difficult.