Counterfeiting in the Primary Industry Sector and the Threat to New Zealand’s Economy

Authors: Ball, R. & Quirke, S.
Published in National Security Journal, Volume 1, Issue 1, October 2019

take place without intervention. Although they may not go so far as to identify this most recent prosecution as falling within this category, industry representatives, like New Zealand Apples and Pears, believe that Mānuka honey is being exploited by international organised crime elements operating within major overseas markets.60


The importance of the dairy industry to New Zealand is critical. In 2018, its exports were valued at NZ$16.6 billion and accounted for approximately 20% of the country’s total goods and services export earnings.61 The ‘Adulteration’ of dairy products, most notably milk, for economic gain is well known, with numerous examples – including New Zealand cases – of deliberate substitution, dilution, unauthorised enhancement and misrepresentation of raw and processed products.62 In early August 2008, executives from the New Zealand dairy co-operative, Fonterra, met with their Chinese joint venture partners, Sanlu Group, and were advised of a ‘melamine contamination’ in infant formula products.63 The UN Food and Agriculture Organisation (FAO) reported that the levels of melamine found were as high as 2,560 milligrams per kilogram (mg/kg) in powdered infant formula, whereas the World Health Organisation (WHO) stipulates the “tolerable daily limit” for melamine levels in infant formula is 1 mg/kg.64 Between early August and mid-September 2008, it is estimated that Sanlu produced 904 tonnes of melamine-adulterated milk powder, worth approximately US$7 million.65 Five weeks after being notified by Sanlu (and two weeks after the end of the Beijing Olympic Games) Fonterra advised the New Zealand Government of the discovery.66 Shortly after, the Chinese Government, in response to an urgent communication from New Zealand officials, commenced a recall of Sanlu Group dairy products in China. Further Chinese testing indicated that the milk products of 20 other dairy companies had “excessive traces of melamine” in various products. Testing also found international brand products made in China by “Cadbury, Nestlé and Unilever were also tainted with the substance melamine,” making it, at face value, an industry-wide issue which by this time had resulted in the “death of six babies and poisoning of more than 290,000 mostly infants.”67 Nevertheless, Sanlu was the first Chinese company identified producing and selling ‘Adulterated’ infant formula, and was declared bankrupt in December 2008. Fonterra lost its entire investment capital of USD$153 million.68

In 2012 when the issue of counterfeiting infant formula was raised again by the dairy industry, MPI claimed it had “rigorous standards and programmes that New Zealand companies exporting infant formula and milk powders must meet,” but admitted it had no control over counterfeiting.69 In 2015, Fonterra invested in an 18.8% stake of the baby and child food company Beingmate, supposedly China’s biggest domestic supplier of milk formula, and the first venture undertaken by the company in China since the Sanlu scandal.70 Allegations of tampering of Beingmate milk powder would surface the following year when a Beingmate company dealer, with criminal links, was