New Zealand milk powder imports have been banned in China after bacteria that could cause botulism was discovered in some dairy products, including those used in sports drinks and baby formula.
The move, which was triggered by safety concerns, threatens a $9.4 billion annual dairy trade, Reuters reported.
Global dairy giant Fonterra identified eight companies to which it had sold contaminated New Zealand-made whey protein concentrate, exported to China, Malaysia, Vietnam, Thailand and Saudi Arabia and used in products including infant milk powder.
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Nearly 90 percent of China's $1.9 billion in milk powder imports last year originated in New Zealand and economists said a prolonged ban could produce a shortage of dairy products in China, including foreign-branded infant formula.
Australia was caught up in the ban after some of the contaminated whey protein concentrate was exported there before being sent on to China and elsewhere.
"The authorities in China, in my opinion absolutely appropriately, have stopped all imports of New Zealand milk powders from Australia and New Zealand," New Zealand Trade Minister Tim Groser told Television New Zealand.
While there was no official word of a ban from Chinese authorities, China's consumer watchdog named four companies that had imported potentially contaminated products from Fonterra.
In a statement on its website, the General Administration of Quality Supervision, Inspection and Quarantine identified the companies as Dumex Baby Food Co., Ltd, a subsidiary of France's Danone, two subsidiaries of Wahaha Group, one of the largest beverage manufacturers in China, and the state-owned Shanghai Sugar, Tobacco and Alcohol company.
Fonterra, a big supplier of wholesale dairy ingredients to multinational food and beverage companies, also said that Coca Cola's Chinese subsidiary and animal feed companies in New Zealand and Australia had also been affected.
The State Food and Drug Administration (SFDA), in an announcement on its website, said it had told representatives from Hangzhou Wahaha, Dumex and Coca Cola China to stop sales of potentially contaminated products and recall any outstanding product lines with possible contamination as soon as possible.
A Coca Cola spokeswoman said the company was preparing to recall select batches of its Minute Maid Pulpy Milky product line in China because it had used potentially contaminated whey protein, but added that because of the heat-treatment process it uses, there was no risk to consumers.
"The recall is really a measure we are putting in place to reassure consumers, but because of our manufacturing process, our products are safe for consumption in any case," Sharolyn Choy, Group Communications Director for Coca-Cola Pacific, said by telephone.
She said only 25 kg (55 pounds) of the ingredient had been used out of 4,800 kg received, but did not say how much end-product would be impacted by the recall.
Some of China's biggest food and beverage firms are said to be customers of Fonterra.
Fonterra is a major supplier of bulk milk powder products used in infant formula in China but it had stayed out of the branded space after Chinese dairy company Sanlu, in which it had held a large stake, was found to have added melamine - often used in plastics - to bulk up formulas in 2008.
More than six children died in the industry-wide scandal and hundreds became ill. Foreign-branded infant formula has since become a prized commodity in China.
The latest scare coincided with global dairy prices hovering near record highs as supply struggles to keep up with growing demand from emerging countries. A ban on New Zealand products was seen pushing overall prices higher in the near term.
Economists said domestically produced Chinese dairy supplies were at low levels and Beijing's ban on imports from New Zealand and Australia would tighten supplies on the consumer market.
"Domestic production in China has been fairly weak, so potentially there could be a shortage of product for a while," ANZ economist Con Williams told Reuters. He said China would in the meantime likely turn to the United States and Europe.
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In New Zealand, Nutricia, a division of Danone, recalled some types of infant formulas sold under the Karicare brand.
The bacteria behind the latest scare, Clostridium Botulinum, is often found in soil. The Fonterra case was caused by a dirty pipe at a processing plant.
It can cause botulism, a potentially fatal disease that affects the muscles and can cause respiratory problems. Infant botulism can attack the intestinal system.
This is the second contamination issue involving Fonterra this year. In January, it found traces of dicyandiamde, a potentially toxic chemical, in some of its products.
Following China's import ban over botulism fears, the Sri Lanka government also ordered an immediate suspension of New Zealand milk powder imports officials confirmed on Monday.
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