Text | Shiwu Team

The production system inspections that made the infant formula industry "anxious" have just ended, and now a wave of "flight inspections" has hit the liquid milk-dominated dairy processing sector, with Hunan Food and Drug Administration taking the lead.

On August 1, the Hunan Food and Drug Administration issued two flight inspection warning letters regarding the dairy industry, warning Hunan Prince Milk Group Biotechnology Co., Ltd. and Changsha Wahaha Dairy Co., Ltd. respectively.

"Unruly" Prince Milk: Who's to Blame?

On July 12, 2018, the Hunan Food and Drug Administration organized a flight inspection team composed of regulatory and review personnel. Based on relevant laws, regulations, and standards, they focused on two aspects of Prince Milk's production: environmental conditions and production process control. The following problems were found:

  1. Multiple damages on the workshop floor and window sills were not repaired;
  2. Cleaning tools were randomly stored in the raw material feeding area;
  3. The drainage area in the fermentation zone lacked a water seal device, with slight odor;
  4. The changing room in the beverage filling workshop was not equipped with block-type shoe cabinets, iron cabinets were severely rusted, and personal clothes and work clothes were mixed;
  5. Some ultraviolet lamp tubes in the workshop were blackened and not replaced; the ozone generator in the beverage filling room had insufficient power relative to the room volume;
  6. The material temporary storage room and cleaning room were not equipped with ventilation facilities;
  7. Some logistics doors and equipment maintenance doors in the workshop were not strictly controlled, posing a risk of cross-contamination between personnel and materials;
  8. Some pipelines in the workshop lacked labels for contents and flow direction;
  9. In the fermentation area, there was a process inspection workbench, and it was found that NaOH standard solution was present without effective control;
  10. In the CIP cleaning room, employees carried the alkali solution to the second-floor platform for feeding, posing safety risks during operation.

Judging from the above 10 problems, using "dirty, messy, and bad" to describe Prince Milk's factory workshop might be a bit harsh, but according to the problems reported in the Hunan Food and Drug Administration's flight inspection warning letter, it is evident that Prince Milk's factory production system is extremely non-standard.

The wording of the above problem report is also noteworthy, with vivid words such as: multiple, random, mixed, insufficient control, lack of effective control, severely rusted iron cabinets, etc.

A flight inspection is like a sudden physical examination for a person; without preparation, the problems found reflect the usual state. The problems in Prince Milk's factory workshop are like a group of children in the entire dairy industry: other children are neatly dressed and clean, but there is one child who is dirty, with tattered clothes and dirt all over, as if just playing in the mud or climbing out of a stinking ditch.

Over the years, the Shiwu team has visited many dairy factories, and to be honest, we have never seen a factory as dilapidated as Prince Milk!

According to business registration information, Prince Milk currently has two shareholders: Beijing Sanyuan Foods Co., Ltd. holds 60%, and Xinhuahu Holding Co., Ltd. holds 40%.

In November 2011, Sanyuan and Xinhuahu jointly restructured Prince Milk, originally hoping that a state-owned enterprise and a local private enterprise could form a synergy to ensure that Hunan people could drink safe, high-quality local milk. But now it seems: one monk carries water to drink, two monks have no water to drink.

Logically, local regulatory authorities tend to have a protective bias towards local large enterprises, after all, they are major taxpayers and contribute to local GDP performance. But why did Prince Milk receive such a severe warning from local regulators?

The public is unaware of the hidden details, but according to normal logic: if some enterprises or shareholders are "absent-minded" and do not spend time and energy on operation and management, and the enterprise stagnates for a long time, such local enterprises contribute nothing to the local government and are even a burden.

Occasionally sounding an alarm and giving a wake-up call is not necessarily a bad thing.

Zong Qinghou's Wahaha Also Starts to Slack Off

On July 25, 2018, the Hunan Food and Drug Administration organized a flight inspection team composed of regulatory and review personnel. Based on relevant laws, regulations, and standards, they focused on three aspects of Changsha Wahaha's production: environmental conditions, production process control, and storage and delivery control. The following problems were found:

  1. The ceiling of the changing room at the entrance of the ingredient workshop had cracks and was uneven;
  2. There was a direct door connecting the general operation area and the bottle sorting workshop (quasi-clean operation area), allowing personnel to enter and exit freely without effective control;
  3. The acid and alkali feeding room of the CIP cleaning system had a direct door connecting to the beverage ingredient workshop, without effective control, leading to easy cross-contamination of materials;
  4. Raw and auxiliary materials from three subsidiaries were stored in the same warehouse without strict zoning management;
  5. The food additive warehouse was not managed by dedicated personnel.

In fact, these five problems of Wahaha are not very serious; they are just some details in the production workshop. But from the wording of the warning letter, the regulatory authorities mainly believe that Wahaha lacks control.

To be honest, Wahaha is now facing not growing pains but a midlife crisis. From products to marketing to channels, they are at least half a beat behind the new era of socialism.

Take Nutrition Express, for example. It once created a brilliant achievement of over 10 billion yuan, but now it has nearly halved, with sales revenue declining year after year. Is it that consumers no longer need nutrition? Wrong. Consumers need nutrition more than ever, but they have realized the "real" nutritional value of Nutrition Express.

Recently, Wahaha has also learned from Mengniu and started to engage in new retail, launching milkshake-like new products, and even venturing into goat milk powder. It always gives people a feeling of learning to walk like a toddler in Handan. In the end, Zong Qinghou himself might not know how to walk.

Instead of following others, it is better to calm down and study this era, study the real consumption habits and needs of the young generation like the post-90s and post-00s, and understand the essence of new retail. It is definitely not a concept or gimmick, but how to provide convenience to consumers and how to give them the ultimate consumption experience.

Returning to the warned Changsha Wahaha Dairy Co., Ltd., according to business registration information, the legal representative of this company is Zong Fuli. Of course, as the successor of the Zong family business, she has many businesses to manage. Dairy products account for a very small proportion of Wahaha's overall business. But if this segment has problems one after another, it could become the "short board" that drags down Wahaha, and the overall goodwill and brand image could be destroyed by a small negligence in dairy products.

Source: Shiwu

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