Starbucks China Switches to Soy Milk, Pulling Mengniu Products

By Nipa Piboontanasawat and Kelvin Wong

Sept. 19 (Bloomberg) -- Starbucks Corp., the world's biggest coffee-shop chain, switched to using soy milk in its China branches to replace dairy products supplied by China Mengniu Dairy Co. because of concerns over melamine poisoning.

The Seattle-based company is now using soy milk produced by Hong Kong's Vitasoy International Holdings Ltd., Caren Li, public relations manager in Shanghai, said today in a phone interview. Starbucks is still studying which milk brands to use in the future, she said.

Melamine, an industrial chemical used to make plastics and tan leather, has been found in batches of liquid milk and yogurt from China's biggest producers, broadening a scandal in the country's $19 billion dairy industry. The scandal raises questions about how many consumers have been exposed to the chemical, which has been linked to kidney failure in babies leading to at least four deaths.

Starbucks ``is aware that Mengniu has now confirmed contamination in certain lot codes of its liquid milk,'' it said in an e-mailed statement. ``Due to the serious nature of this warning, Starbucks has voluntarily pulled all Mengniu milk offerings until further notice.''

The company said it was assured by its supplier ``that the milk we received from Mengniu is not included in the contaminated lots.''

Batches of liquid milk and yogurt produced by China Mengniu Dairy Co., Inner Mongolia Yili Industrial Group Co. and Bright Dairy & Food Co., the country's top three dairy producers by value, have been found to contain melamine, the Chinese quality watchdog said, adding to a list of infant formulas already known to be tainted.

Tests prompted by the discovery of melamine in milk powder sold by Sanlu Group Co. showed that products from Mengniu, the nation's biggest liquid milk producer, and 20 other companies were also tainted, the Chinese government said earlier this week. The contaminated milk has been linked to the deaths of at least four infants and the hospitalization of more than 1,300.

The findings prompted Premier Wen Jiabao to order an overhaul of the country's entire dairy industry.

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net; Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net