Sanwei's Response To The Sanyuan Group Case

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Sanyuan Group In response to the Sanlu scandal, the Chinese government advised the Sanyuan Group to consider a merger plan with Sanlu (Xinhua News 2009). At the end, Sanyuan Group bought the core assets of Sanlu Group for 616.5 million RMB (90 million USD) in 2009 (Fang & Yue 2009). Sanyuan Group is a state-owned enterprise based in Beijing that was not involved with the 2008 milk product scandal. Sanyuan Group was a much smaller enterprise that was known mostly by local Beijing consumers. With a history of nearly half a century, Sanyuan had a cautious expansion strategy. Its annual sales was approximately 10% of that of Sanlu. Yet, as a result of the scandal, Sanyuan’s net profits in 2008 rose 87% compared with that in 2007 (DeLaurentis 2009). Since the Yili Group also failed the quality testing, Sanyuan was also chosen at the last minute as the sole supplier of dairy products for the Beijing Olympic. The mild expansion strategy of Sanyuan allowed it to focus on CG for long-term development and less on short-term market success. Conscience, love and sense of responsibility are the three core ideas of the brand towards consumers, distributors and employees. In contrast with Sanlu’s reliance on external raw milk supplies, Sanyuan relied on its own dairy farms as the supply for 80% of its milk products (Maynard 2009). It implemented strict mechanisms to assure its product quality. The company specified the importance of safe production, food quality and internal control in its

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