Will Coke get blamed for endangering Chinese consumers?

With two large American companies being investigated for health emergencies in China, the business environment there could be worsening.

By Benzinga Dec 5, 2011 3:29PM

Image: China (© Lawrence Manning/Corbis)By Daniel James Hayden IV, Benzinga Staff Writer


Investors may want to take note of a disturbing trend among Chinese officials, who lately seem more interested in blaming American parent companies for health emergencies. In September, Chinese authorities said American battery manufacturer Johnson Controls (JCI) was responsible for a number of lead poisoning cases in Shanghai.

 

Now they are investigating none other than Coca-Cola (KO) for selling milk products that allegedly caused the death of a young boy and sickened his mother in the city of Changchun, the capital of Jilin province.


According to China Daily, the father of the boy said that his wife and son fell sick shortly after drinking a bottle of Minute Maid strawberry-flavored milk. The boy died after being rushed to the hospital with his mother by ambulance. The mother fell into a coma before gaining consciousness.

Authorities reportedly said they found traces of pesticides in bottles of strawberry-flavored milk consumed by the boy, his mother and two other people sickened in a separate incident.


A Coca-Cola spokeswoman said the company tested samples from the same batch the boy and his mother drank from and found them safe for human consumption. However, the company has agreed to remove the product from store shelves as further investigations are carried out.


It's easy to target a famous American company. But if the milk product was contaminated, it's much more likely that one of Coca-Cola's Chinese suppliers is responsible. Chinese milk producers have a horrible safety record and have gone so far as to attempt to cover up unsafe milk products that sickened thousands of Chinese babies.


Chinese milk producers have added chemical additives intended to fool regulators into thinking the milk contains more protein than it actually does. Despite this, dairy producers have been successful in getting weaker safety regulations passed that are weaker than international standards and even lower than the previous Chinese standards that proved unsuccessful in protecting consumers.


Now, the same authorities that failed to protect consumers from Chinese dairy producers in the past seem to be targeting the world's most famous soft-drink maker, which also has a great safety record. It's still unclear whether or not Chinese authorities are even investigating Coca-Cola's Chinese suppliers.


Chinese regulators are also accusing American battery manufacturer Johnson Controls of business practices that have caused lead poisoning in a number of children near its battery manufacturing plant. Johnson Controls is still under investigation by regulators despite the fact that an investigation by the China Electric Equipment Industry Association found that a nearby waste recycling facility was the source of the high lead levels. The company's Shanghai manufacturing plant was also named a national model enterprise for occupational health and safety.


The accusations against Coca-Cola shouldn't be taken lightly. Cases like these can result in the death penalty in China. It must be disturbing for foreign businesses operating in China to watch as two well-regarded international companies fall under investigation for safety problems that are most likely caused by local companies. The business environment in China is often difficult for foreign companies, but now it could be getting worse.

 

Neither Benzinga nor its staff offer investment advice, nor do they recommend that you buy, sell, or hold any security. 


More from Benzinga:


31Comments
Dec 5, 2011 4:12PM
avatar
Dang.  Im really not a racist but it seems like the Chinese overall have lower ethics, values, integrity, and concern for the value of human life.  Just look at the story of the 2 year old girl who was run over and abandoned in the streets as passersby looked on...
Dec 5, 2011 5:06PM
avatar
You all realize, don't you, that milk didn't come from the USA... it's chinese milk produced by chinese workers in chinese factories.   A place that has a horrible safety record for its products.... And yet, they want to blame an American company.
Dec 5, 2011 4:13PM
Dec 5, 2011 4:19PM
avatar

China questioning health and environmental safety.......

 

Ok.

Dec 5, 2011 4:40PM
avatar
who in their right mind would want to go to China and open a business in the first place... 1. you never know which govt. is in charge... 2. You have a target on your back.... 3. You have to partner up with some local investor that owns 51% of whatever you do, which means if you do not own 51%, you do not own anything at all, and someone else is counting the money... 4. you take your in-country partner to court, who's the winner and who's the looser... 5. If you do too good, make too much money, become a shining star of capitalism in a communist or dictatorial country, you will soon know the meaning of a govt. take over or learn the definition of being nationalized... stupid is as stupid does.. bad investment for your stockholders
Dec 5, 2011 6:39PM
Dec 5, 2011 5:58PM
avatar
Cecil: I am all for fixing things for our children's sake. HOWEVER, we need to get over our schizoid mentality. While you are talking about recapturing US markets, production and manufacturing, there are others screaming about eliminating taxes and eliminating government and government regulations. Don't you think that same thing that took place in China would happen if the US did away with USDA and FDA regulation as the extreme right wing want to do? [study history to find out that this is exactly the reason the agen cies were created, read Sinclair's The Jungle] Do you really believe that these companies would distribute safe products if there were no inspections and regulations. IT is POSSIBLE, but then I hear it is possible for elephants to fly. But i am not betting on it. These are the same types of executives that have embezzled billions of dollars, so counting on their integrity is like wlaking on paper thin ice.
Dec 5, 2011 6:09PM
avatar
Hmm, is it me or is there a bit of what goes around comes around here?

Does anyone remember the incidents in the past ten years of moldy, contaminaed dry wall coming from China? or...tainted dog food, coming from China? ...or melemine contaminated baby formula coming from China?...

I do...

and just for the record, it has been successive REPUBLICAN administrations who have repeatedly pulled out the China credit card - most notably  Bush 41, and of coarse, his destroy the United States by whatever means available son W, who put the debt to China on steroids to avoid making the 1% pay for his illegally manufactured war in Iraq...

Dec 5, 2011 5:13PM
avatar
Get enough incidents like this (and this won't be the last of them), and maybe US companies will think twice about setting up shop there. The cheap labor and lack of regulation won't be worth the trade-off. Long-term - more jobs stay in the US.
Dec 5, 2011 6:52PM
avatar
buy only american,quit buying vachina products.
Dec 5, 2011 5:45PM
avatar
Lets take bake OUR jobs from the basturds, then we can actually afford to buy our products even if they cost more due to the much better quality and safety, becouse more of "US" will actually have jobs. Free Trade agreement was the downfall of this Country LETS FIX IT FOR OUR CHILDREN'S SAKE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Dec 5, 2011 8:49PM
avatar
Having decided to buy as much of Made in USA as possible I have begun to research.  It is not easy but thank goodness for the internet.  What I have found is plenty of made in USA products but you had better be ready to pay.  Will they last longer than Chinese products?  In some cases yes, some no.  I don't care.  I'm putting my money where my mouth is.  Are you?  
Put two lookalike products side by side, one made in USA and priced that way and one made in China and priced lower.  Even with all of the screaming and crying people do the majority will still choose to buy the cheap Chinese product and then justify it by saying how tough times are.  

It's time to fish or cut bait.
Dec 5, 2011 8:01PM
avatar

How about lead in toys and sulphur in Chinese drywall?

 

Guess that's ok?

Dec 5, 2011 6:02PM
avatar
Been2China:   The flaw to your argument is exposed simply by looking at the tax returns for the corporations. The profit derived overseas is not being returned to the US, and the companies are not paying taxes in the US, general Electric earned billions and paid "0" taxes. Rethink your position.
Dec 5, 2011 4:59PM
avatar
Hey there learning from us,sue anybody for anything . Kids are fat, sue MCDonalds
Dec 5, 2011 7:46PM
avatar
Chinese markets are limited for foreign firms. Given the wage/spending capability they are even limited for Chinese firms. China does not respect intellectual property rights, systematically engages in corporate espionage, and does not distinguish military power from economic power. Given that, and the fact that China is vulnerable if nobody wants to do business with them (buy typically low-quality goods with reasonable probability of contamination) a unified consumer and business initiative (though not necessarily formally organized or coordinated) to disengage until reforms are made and financial transparency (ala GAAP) is instituted is the only effective approach. Game theory "tit for tat" is an appropriate model. Is there a will to actually make it happen? Will short-term desire for "cheap goods" win out? Do people prefer venting (blogs) and grandstanding (occupy protesters) or taking effective action? I check where goods are made and minimize those produced in areas I have issues with (and avoid those produced by companies I have issues with). Of course, I haven't been to a MLB game since early 1994 so I obviously am an atypical consumer.
Dec 5, 2011 8:49PM
avatar
Let's see, they're probably using ingredients purchased in China from Chinese, the product is manufactured and bottled by Chinese workers, transported by Chinese and served by Chinese, all it really has of America is the name Coke. So, ya get what ya pay for. Right now, because the Chinese have had multiple product contamination scandals resulting in a rock-bottom opinion of their products, they would love to smear an American company, especially a big one, one whose product the Chinese people are buying so they can really hurt the company.
Dec 5, 2011 7:01PM
avatar

No one can accuse the Chinese of not knowing how to conduct underhanded business techniques.  They will go the last mile to make sure that no one know's it's their local suppliers that are tainted and not producing safe product.

 

This will eventually be a downturn for Chinese business, in that a communist country still has communist ideas on how to be capatilst.  "Tell them anything, who cares, we're the government".

Dec 5, 2011 5:53PM
avatar
Does everyone here realize that Coca-Cola does not 'off-shore' the production of their drinks which we then purchase here in the U.S?  Some of the posters here seem to think that any story about business conducted anywhere but on U.S. soil is equal to a loss of American labor.  What Coca-Cola produces in China, they sell in China.  That is what makes this story all the more disturbing.  Coca-Cola's (and other U.S. companies) products which are built and sold in other countries is critical to our trade income, and since China is the largest growing consumer of products in the world, we cannot afford to be shut out of that market.  And, to put a very fine point on it, the more products we build overseas and then sell to overseas consumers, the more U.S. based technical, scientific,  management personnel which is required to develop and oversee such products... aka - more U.S. jobs.  Not to mention that those overseas sales ultimately flow into the U.S. business engine which ultimately supports all of us.
avatar
chinese consumers need to learn.

why would anyone buy milk products from coke-cola?

its like if we were to buy milk products from china.

it aint going to happen!

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
282
282 rated 2
455
455 rated 3
624
624 rated 4
642
642 rated 5
665
665 rated 6
610
610 rated 7
460
460 rated 8
287
287 rated 9
167
167 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.