Sanlu Group

-------the downfall of dairy giant

Introduction
Sanlu Group .Ltd was a stated-own Chinese
dairy company based in Shijiazhuang, Hebei Province China. It used to be one of the most popular and the largest brands of infant formula in China. With a scale of more than 10,000 employees. New Zealand's Fonterra Dairy Group is the biggest partner, owned 43% of Sanlu.

The aim of the company

Aim and core values: To produce

international level of products and become one of the worlds leading dairy group. Be honest (which is the basic value of the group), Innovative, harmonious and responsible.

Objectives
Sanlu group will be a corporation not only productive but
also environmentally friendly. We are making efforts to use our industry chain to improve local employability. At the same time, employees who have great contribution to the company will be awarded bonus From the year of 2003. Our company should reach the annual growth of 30%. And rank the first nationwide for sales volume of infant formula as well as in dairy industry. In 5 year we will have an international partner. . to ethics

Sanlu group will be a corporation not only productive but also

environmentally friendly.

Stakeholders:
1. local society of Shijiazhuang:
environment .Ecolean 2. Pressure group of CHINA ENVIRONMENTAL PROTECTION FOUNDATION: model, donation. 3.shareholder: increase cost. Didnt meet the need.

We are making efforts to use our industry chain to improve local employability. At the same time, employees who have great contribution to the company will be awarded bonus

Stakeholders:
1. Local society of Shijiazhuang: More
employability, be Stable, Enhance local economy 2. employees: want more return, 3. Shareholders: want more dividend, reduce cost.

From the year of 2003. Our company should reach the annual growth of 30%. And rank the first nationwide for sales volume of infant formula as well as in dairy industry. In 5 year we will have an international partner.

Stakeholder.
Shareholder :New Zealand Fonterra
Group, trustworthy partner. Make sure to get valued Government of Shijiazhuang: receive more tax. Infrastructure. customer: trust big brand.

Ethical issue 1
Sanlu used to have a strict standard on the
quality of the milk supplier before 2006. In result to this, not many of the suppliers reached its standard. In 2007, due to the fierce competition in dairy industries. Sanlu secretly reduce the standard of supplier and allow lower quality suppliers to franchise with the group. That reduce a great deal of cost but cause serious problem of milk quality. And they told a lie to the public.

Means of Address
Sanlu was under pressure of public
opinion and later issued the plan to monitor the quality of both suppliers and milk. In addition, Sanlu emphasized its advertisements on internal quality supervision, Drew the attention of public. which regained the confidence of customers. This time Sanlu off the hook.

Ethical issues 2
In September, 2008. Sanlu group has involved
in milk powder scandal. The news exposed that Sanlus infant formula milk powder contains the chemical substance of melamine. Its a cause of thousands of babies kidney stone and deaths. Sanlu denied it later and clearly stated that every product it produce is quality safe. Sanlu has the responsibility of monitoring the milk quality. But they failed to take it seriously and keep hiding the bad news.

Why melamine?
The typical way to exam protein content in
food is to measure the proportion of nitrogen element in it. Melamine contains a great deal of nitrogen element which can let the exam result of protein look good. Sanlu wants to make its products more competitive especially the nutrition fact on the label.

How did Sanlu deal with its stakeholder after the scandal?
Sanlu didnt actually involve in the addition of melamine. It was the local suppliers fault. What they responsible in is to monitor the health safety of its product. However Sanlu didn't do well in it .Look at the step it has taken:

1. Give bribery to the victims and media for not exposing the news and ban the news by different means. (3 million Yuan to Baidu) 2. At first, it secretly recalled its contaminated product. (but later they have to do it publicly) 3. Sanlu planned to pass the buck to its suppliers. And planned to give explanation to the public which doesnt make any sense.

Result and impact

Sanlu fails to gain back the trust of its customers. Its action of secret recall and secretly deal with
victims has been the potential threat of its public trust. And its planned action to pass the buck to suppliers stimulates the anger in the public. The behaviour do against the social ethics and also its own core value which leads the failure of the company

 Sanlu finally went bankruptcy. Even

though once it was the pride Chinese dairy industry. Some of the suppliers were sentenced to death and CEO got lifetime imprisonment. Unfortunately the victims didnt get any pay from it.

Conclusion
Sanlus well planned objectives and aims
once brought it success. But its behavior goes against social ethics and suicide itself finally. From this we can see no matter how big or reputable a company is, once it loses the trust of customers and society and fail to reach the goal of morality. It will collapse eventually.

 Reference:
1.http://www.docin.com/p-131666945.html (in Chinese) 2.http://www.chinaccm.com/12/1212/121202/news/20030821/17122
9.asp (in Chinese) 3.http://www.chinadaily.com.cn/china/200809/12/content_7020499.htm 4. http://www.chinadaily.com.cn/china/200902/13/content_7472161.htm 5. http://en.wikipedia.org/wiki/Sanlu_Group 6. http://english.caijing.com.cn/2008-12-31/110044281.html 7. http://tech.163.com/08/0915/10/4LSH6KSA000915BD.html (in Chinese) 8.http://news.qq.com/a/20070523/002297.htm 9. http://npc.people.com.cn/GB/28320/8635367.html (in Chinese)