China’s latest food scandal will change consumer behaviour

It’s about a 1,300km trip from Ningxia province in western China to the coastal city of Qinghuangdao in Hebei province, just east of Beijing. It was the journey a tanker driver took to deliver tens of thousands of litres of coal-derived fuel. In a bid “to save costs,” the driver was not allowed to make the return trip with empty tanks, so he drove to a facility in another part Hebei. Without cleaning or disinfecting, the fuel tanks were refilled with cooking oil for his trip back west.

Anything used to transport coal-derived fuel is tainted with unsaturated hydrocarbons and sulphides; chemical liquids that seep into eatable oils, potentially poisoning those unfortunate enough to consume it as cooking oil or syrup in the short term, or effecting vital organs in the longer term. 

The tanker driver had shared the details of his trip with an undercover journalist, who earlier this month reported the incident in state-run newspaper, the Beijing News. The exposé is significant for a couple of reasons:

Firstly, it was unusual for such a big scandal to be released by state-run media this close to this week’s Third Plenum, one of the important meetings of the Chinese Communist Party occurring roughly once every five years. It was not normal as Beijing typically ensures positive news leading up to its big meets. The incident was not a one-off and was referred to as an “open secret,” so the timing of the story was interesting.

Whilst the firestorm on social media was soon censored, the damage was done for both the state-owned and private companies involved, a fail for the regulators policing food safety standards, and a significant hit for China-Inc as a whole. Even state-broadcaster CCTV, after a week of radio silence, gave an unusally damning report on the danger.

Secondly, the impact that the scandal will have on consumer behaviour in China should not be underestimated. Although no babies have died or been hospitalised yet, many consider this to be the biggest food scandal since the melamine tainted milk scandal of 2008. As we’ve noted before, consumers were still raising the scandal a decade later during China Skinny research, even for non-dairy categories.

This eatable-oil scandal is unlikely to have the same enormous and lasting impact as the Melamine Scandal, which not only effected the food & beverage industry, but related categories such as beauty, personal care and health products. Yet it has undoubtedly damaged the perception of Chinese brands’ integrity, standards, quality control and, most importantly, safety for the next 6-12 months at least.

It has come at an unfortunate time for domestic brands, whose reputation for safety has improved dramatically over the past decade. This perception did particularly well during the pandemic. But their run of growing market preference may be impacted, as many consumers are more likely to consider foreign brands. Expect to see a number of domestic brands’ communications focusing on food safety in hope of quelling these concerns.

We are also likely to see a bump in demand for organic and natural foods (which was already trending) as consumers minimise safety risks. Consumers will also scrutinise food labels, particularly their ingredients and origin, as they seek transparency and reassurance about the products. Brands that have incorporated traceability tech into their products are also likely to be beneficiaries. 

We have found after food scandals in the past, consumers become more likely to cook at home for a period, allowing them more control of the ingredients and preparation of their food. Products better suited to home dining are likely to see more favour.

Another consequence is Beijing is likely to review and potentially reform its food safety laws and mechanisms in hope of reducing the likelihood of it happening again. This may impact both domestic and imported food brands. There could also be some propaganda villainising foreign food to try and restore faith in the domestic fare.

There is no disputing how horrific this latest food poisoning event is. Foreign brands are likely to see increased demand for their products as a result, however they should also factor in the broader impacts above to ensure that they do not suffer by being underprepared.