Consumers worried about Johnson & Johnson

The baby care products market in China is forecast to be worth 3.11 billion yuan this year. Wang Jing & CFP

Thousands of Chinese parents are turning their backs on Johnson & Johnson and other foreign brand baby care products after recent dramatic health scares damaged consumer confidence, according to a recent online survey.

In the first major test of public opinion since a US consumer group alleged that some baby products by the American giant contained traces of elements linked to cancer, three-quarters of nearly 120,000 consumers questioned by ifeng.com, said they had stopped buying Johnson & Johnson products.

Information from trade sources also suggests that Chinese customers are shunning foreign brands and opting to buy what they now perceive as more trusted local ones.

Such a switch is a reverse of last year's baby milk powder scandal when Chinese companies came under world focus for adulterating some products with melamine.

Recent health scares have not just centered on Johnson & Johnson but on the German company NUK, whose baby powder was found to contain asbestos, a known carcinogen.

Johnson & Johnson products have since been given the all-clear by the Chinese authorities while NUK's baby powder is still subject to a massive product recall.

Michelle Huang, research analyst at global market researcher Euromonitor International in Shanghai, said there has already been an impact on the supermarket shelves.

"There is evidence from trade sources that Johnson & Johnson's sales have been declining as a result of this. However, I think this could be a short-term impact. I think Johnson & Johnson brand loyalty is quite strong in China and so long as they can deal with this appropriately their sales should recover in the long run," she said.

But the signals from the ifeng.com online poll are likely still causing New Brunswick, New Jersey-based Johnson & Johnson some concern.

Nearly two-thirds (64.8 percent) of those polled thought Johnson & Johnson products were poisonous with 13.1 percent said they weren't and 22 percent were unclear.

Only 10.9 percent said they were continuing to buy Johnson & Johnson products and 14.2 percent were undecided.

If Johnson & Johnson sales are affected, it will be fall from a great height. According to Euromonitor, the company accounted for 68.6 percent of baby care products sales in 2008 in China, dwarfing its nearest rival, the Chinese company Tianjin Yumeijing Group, which makes the popular Yumeijing baby lotion, although the Chinese product's relatively low cost accounts for some of the disparity.

The baby care products market as a whole is forecast to be worth 3.11 billion yuan this year, up 10.6 percent from 2.7 billion yuan in 2008, according to Euromonitor.

It is a huge market not just because of China's vast population but because Chinese parents, according to government statistics, spend around 30 percent of household income on their children up to the age of 14, a figure that far exceeds what parents spend in the West.

David Lung, Far East consumer products leader for international business advisers Ernst & Young in Beijing, said he believes the recent health scares could impact sales growth this year and make some Chinese consumers steer clear of baby care products altogether.

"This event will not impact just on Johnson & Johnson but on other foreign brands but, similar to the baby milk scandal, it could cast a shadow on some local brands as well," he said.

"Some Chinese consumers may take the view that baby care products may not be necessary and revert to more traditional methods of looking after their babies."

The problems for Johnson & Johnson began in March when a US consumer group, the Campaign for Safe Cosmetics, announced it found traces of formaldehyde and 1,4 dioxane in some of Johnson & Johnson's baby bath products.

This led to an investigation of these products by the Chinese health authorities and led to one major supermarket chain, Nonggongshang Supermarkets Corp, removing baby shampoo, soap and lotion made by Johnson & Johnson from its shelves.

It also emerged that the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) in China was investigating NUK baby powder after authorities in South Korea, where the powder is manufactured, discovered that the product contained asbestos. NUK has since recalled all its baby powder products.

Johnson & Johnson products have since been given the all clear, not only by the AQSIQ but also by the State Food and Drug Administration.

The testing results showed the formaldehyde levels all met national standards and that only minute traces (3.27 parts per million) of 1,4 dioxane were found in one batch of the Peach Baby Bath product. Nonggongshang started selling Johnson & Johnson products again.

Wang Meiying, general manager, Johnson & Johnson (China), said she understood the public's concern.

"We understand people's fears and doubts about our company's baby products after a US consumer group alleged they contained carcinogens. We are confident about our products' quality and we understand our consumers' need for specific and credible answers, " she said.

"We contacted the relevant authorities and carried out surveys at the first opportunity and have been cooperating with government investigations," she said.

The company has extended the opening hours of its customer hotline to deal with consumer worries.

"As a company with more than 100 years experience taking care of babies, Johnson & Johnson knows it is not easy to establish credibility in this field, " she added.

"Therefore the company always puts consumers' safety and product quality as a top priority," she said.

Wu Dong, senior director of Johnson & Johnson's emerging markets innovation center, said the fact that one product had a trace of 1,4 dioxane should not be of concern to the public.

"Dioxane exists widely in materials such as coffee, shrimps and tomato. For example, the content of dioxane in a shrimp is about 20 to 30ppm," he said.

"Australia's health department believes 30ppm is an ideal limit for content of dioxane in daily consumption goods, except in foods and medicines, and it will be safe if the content is less than 100 ppm," he said.

NUK's baby powder, which has been on sale in China for 10 years, still remains off the shelves, however, as part of a voluntary recall and its mainland distributor, Suzhou Debao, sealed off remaining products in its warehouse.

"We can assure consumers that we are working closely with the manufacturer of the bulk product in South Korea to conduct a full investigation on this issue. China is a very important market for NUK and we are working with relevant government authorities to investigate the issue, " an NUK spokesperson said.

NUK is focusing its attention on its manufacturer, Boryung, in South Korea, which exports the products to China to be repackaged for retail distribution.

"We are committed to ensuring that all of our products are in full compliance with the local regulation of those markets in which our products are sold and are liaising closely with Chinese government authorities to investigate the issue," said the spokesperson.

Lung at Ernst & Young said it is crucial for companies involved in health scares to get their messages across to the consumer in China because it is a market in which rumors spread like wild fire.

"I think it is important for manufacturers to send out key messages to all the various parties about product safety in situations such as these," he said.

"Because of the baby milk powder scandal here consumers are more aware of these issues and are less likely to give a second chance to enterprises or brands that deceive them," he said.

He said the Internet and digital media culture in China mean that it doesn't take long for consumers to become aware of any problems concerning a particular product.

"This has created an environment where rumors travel through the consumer community as fast as anywhere in the world. If companies are caught ignoring issues, they risk being instantly humbled," he said.

"Chinese consumers are also getting more sophisticated and have ever increasing expectations about their products so they are more aware of their rights and more willing to speak up about any malpractice," he said.

The health scares have come at a time when there are already worries that the baby care products market growth may not be as strong as expected this year.

The big impact may not be the economic downturn - baby care products retain a certain demand inelasticity in China the large number of one-child families inevitably allows higher spending on each individual child - but from a lower birth rate.

The number of babies born in 2008 was higher than normal because of the Olympics (big events often dictating birthrates in China) and is likely to fall off this year.

This may double the headache for Johnson & Johnson as it attempts to recover from the recent health scare.

Huang at Euromonitor said it could take more than six months before confidence is fully restored again in Johnson & Johnson baby care brands.

She said the key indicator is the experience of the leading Chinese brands after the baby milk scandal.

"Consumer are beginning to recover from the baby milk scandal and starting to try some of the affected brands again and it is six months since it happened. It can take a significant length of time for confidence to be restored," she said.

(China Daily 04/27/2009 page8)