Sanlu Group
| Company type | Collective enterprise |
|---|---|
| Industry | Dairy products |
| Founded | February 16, 1956 in Shijiazhuang, Hebei, China |
| Founder | (not explicitly stated) |
| Defunct | December 24, 2008 |
| Fate | Filed for bankruptcy |
| Headquarters | Shijiazhuang , China |
Area served | China |
Key people | Tian Wenhua (Chairman and general manager) |
| Products | Infant formula, powdered milk, lactic acid bacteria beverages, yogurt |
| Owner | Management and employees; 43% owned by Fonterra; 56% by Shijiazhuang Three Deers Limited |
Number of employees | Nearly 10,000 (2008) |
| Website | (archived, URL not provided) |
Sanlu Group CO., Ltd. (SJZSGCZ) was a prominent Chinese dairy products manufacturer based in Xinhua District, Shijiazhuang, Hebei province. It was known for producing one of the country’s most established and widely recognized infant formula brands. The New Zealand cooperative Fonterra held a 43% ownership stake in Sanlu.
In September 2008, Sanlu became the focal point of a significant milk contamination scandal, where its infant formula was found to be tainted with melamine. This incident impacted around 294,000 infants and tragically resulted in six fatalities. The crisis inflicted substantial damage on the company’s reputation and financial health. On 24 December 2008, Sanlu filed for bankruptcy, and several senior executives were sentenced to lengthy prison terms.
A can of Sanlu milk powder is featured in the Disgusting Food Museum located in Malmö, Sweden, symbolizing the lasting effects of the 2008 food safety crisis.
Ownership and business
Sanlu’s origins trace back to the establishment of Shijiazhuang Dairy Company (SDC) on 16 February 1956. Following a series of acquisitions in 1995, the Sanlu Group was formed in 1996, with Tian Wenhua—formerly SDC’s general manager—appointed as both President and general manager. Under Tian’s guidance, Sanlu led China’s powdered milk market in sales for thirteen consecutive years. Tian was recognized as a notable entrepreneur, serving as deputy chairman of the China Dairy Industry Association and holding a seat on the National Committee of the Chinese People's Political Consultative Conference. The company operated as a collective enterprise, with shares held by both management and employees.
Sanlu emerged as Shijiazhuang’s largest taxpayer and maintained its leading position in formula sales across China for fifteen years. Richard McGregor described Sanlu as "an invaluable asset" for a city aiming to attract industrial development and investment comparable to China’s major urban centers.
In December 2005, Fonterra, a New Zealand dairy cooperative, purchased a 43% equity interest by investing ¥864 million in a joint venture with Sanlu. This partnership commenced operations in 2006. The controlling 56% stake continued to be held by Shijiazhuang Three Deers Limited.
Expansion
In February 2006, Sanlu inaugurated a dairy production facility in Tangshan with an annual output capacity of 200,000 tons of powdered milk. Following its collaboration with Fonterra, Sanlu announced plans to invest ¥3 billion over three years to establish a nationwide industrial network. In April 2006, it acquired a liquid milk manufacturing base in Weifang, Shandong province, with an annual capacity of 300,000 tons at a cost of ¥400 million. Later that year in October, Sanlu invested ¥120 million to develop a facility producing 100,000 tons per year of lactic acid bacteria beverages and yogurt in Xinxiang, Henan province.
By 2007, Sanlu’s revenues reached ¥10 billion. It commanded an 18% share of the milk powder market—the leading position it had sustained for fifteen years. The company prioritized rigorous quality assurance measures, performing over 1,000 tests before products were released from its factories. In January 2008, Sanlu earned second prize at the National Scientific Techniques Awards for pioneering research in infant formula development. Several of its products were exempted from government inspections after successfully passing quality assessments three times consecutively. Employing nearly 10,000 individuals, Sanlu ranked among the largest employers in Shijiazhuang.
Milk powder contamination crisis and collapse
In September 2008, Sanlu became globally infamous after its infant formula was discovered to contain melamine, a chemical linked to kidney stone formation. This contamination affected around 300,000 babies, resulting in six deaths.
The company first encountered complaints as early as December 2007. Reports indicate Fonterra was only made aware of the contamination on 2 August 2008 but encountered obstacles locally when attempting to initiate a recall. Following media revelations, the New Zealand government was informed on 5 September, with Prime Minister Helen Clark personally notifying Beijing officials three days later. Clark accused both Sanlu and local authorities of concealing the issue to avoid product recalls.
On 15 September, Sanlu issued a public apology and received orders to halt production immediately and destroy all remaining and recalled inventory, totaling roughly 10,000 tons. Subsequent testing showed that every one of the 11 Sanlu samples tested positive for melamine contamination, with levels reaching up to 2,563 ppm—the highest among all companies tested.
Tian Wenhua (田文華), who served as Sanlu’s Chairman and general manager, was removed from his party and official positions. Several officials from Shijiazhuang were also dismissed, including the vice mayor responsible for food safety and agriculture. Mayor Ji Chuntang resigned on 17 September. Tian was prosecuted under applicable criminal statutes.
The suspension of Sanlu’s operations had a significant negative effect on local dairy farmers since it was the largest purchaser of milk in the area. On 24 September, Fonterra announced a NZ$139 million impairment charge—amounting to two-thirds of its investment—attributed to recall expenses and reputational damage stemming from the scandal. Chairman Henry van der Heyden characterized the contamination as a criminal offense beyond Fonterra’s control. On 26 September, Fonterra’s CEO denied rumors about plans to divest its 43% ownership stake in Sanlu.
Insolvency
On 27 September 2008, China Economic Net reported that Sanlu was facing bankruptcy and potential acquisition by Beijing Sanyuan Food Company Ltd.. In November, Sanyuan Group declared it would acquire four Sanlu production plants in Shijiazhuang along with facilities in Tangshan, Shandong, and Henan, assuming part of Sanlu's outstanding debts. The transaction was valued at approximately ¥800 million.
By 19 December, Sanlu obtained a ¥902 million loan intended for medical treatment and compensation payments to children harmed by the contaminated milk powder. On 25 December, a court in Shijiazhuang accepted a creditor’s petition to declare Sanlu bankrupt; at this point, the company reportedly had net liabilities amounting to ¥1.1 billion. The primary shareholder, Shijiazhuang city authorities, sought to sell off its distribution network as an ongoing business.
Legal proceedings against executives
On 31 December 2008, four former Sanlu executives—including ex-general manager Tian Wenhua and deputy general managers Wang Yuliang and Hang Zhiqi—were prosecuted for manufacturing and distributing substandard products. Tian admitted guilt and advocated for China to implement the European Union's melamine safety standards. Wang, who survived an attempted suicide, expressed regret over the harm caused.
On 22 January 2009, Tian was sentenced to life imprisonment along with a fine of 20 million yuan (approximately US$2.9 million); other executives received prison terms ranging from five to fifteen years. Two additional individuals were handed death sentences. Despite declaring bankruptcy, Sanlu was fined 50 million yuan (around $7.3 million).
See also
External links
- Sanlu (Archived)
- Short description with empty Wikidata description
- Dairy products companies of China
- Companies based in Hebei
- 2008 Chinese milk scandal
- Defunct manufacturing companies of China
- Fonterra
- Companies based in Shijiazhuang
- Companies that have filed for bankruptcy in the People's Republic of China
- Chinese companies established in 1956
- Chinese companies disestablished in 2008
- Food and drink companies disestablished in 2008
- Food and drink companies established in 1956