Sanlu Group

Sanlu Group was created in 1996 after several acquisitions in prior years. It was one of the oldest and most popular brands of infant formula in China. Tian Wenhua, the CEO and Chairwoman of Sanlu led the Chinese powder market for 13 consecutive years in terms of sales. Tian was considered one of the most successful entrepreneurs in China for her role in building the company. In December 2005, a joint venture agreement was signed which involved New Zeeland dairy cooperative Fonterra taking a 43% of company equity. Sanlu employed nearly 10,000 people, and was one of the largest employers in Shijiazhuang, the capital of Hebei province. Since the 1990s, Sanlu launched multiple rounds of successful acquisitions, labeled as “low-cost expansions.” Three of those major acquisitions were made in 2006 alone. In February 2006, the group opened a dairy plant in Tangshan with an annual output capacity of 200,000 tons of formula milk powder. In April 2006, Sanlu acquired a liquid milk production base in Weifang, which was capable of producing 300,000 tons of liquid milk every year. In October of the same year, the company invested in production facilities with an annual capacity of 100,000 tons of lactic acid bacteria drink and yogurt. Sanlu prided itself on its stringent quality control by boasting extremely rigorous test procedures for its products. In 2007, the Chinese Ministry of Commerce awarded Sanlu the titles of “the Most Competitive Brand” and “the Renowned Brand in China.” Forbes ranked Sanlu number one on its list of top Chinese dairy enterprises. In late 2007, multiple consumer complaints and media reports began to emerge, blaming tainted baby powder milk for a number of cases of infant kidney failure. Some of these cases had a confirmed link to products from Sanlu, which had been China’s number one seller of baby formula consecutive years and had accounted for more than 18 per cent of the Chinese baby formula market in 2007. Sanlu had manufactured a product