“In the decades I have been selling, this is the first time I have ever seen such a cold market for mooncakes for the coming Mid-Autumn Festival,” Wang Fengyi, a saleswoman in Beijing’s major shopping street of Wangfujing, said of mooncakes – the rich, round pastries filled with any one of a variety of mixtures such as sweet red bean paste, lotus nut paste, or salted egg yolk.

The negative market response surely comes from a TV program aired on September 3 by state-owned station, China Central Television (CCTV), about the Nanjing Guanshengyuan Company, a well-established food processing company with 63 years history, using fillings for its mooncakes that were recycled from mooncakes that did not sell the year before.

The program ignited the indignation of the general public who already has been plagued by scandals of shabby or even poisonous food products in recent years. But mooncakes? Mooncakes mean more than food to Chinese. Eating mooncakes in the period of the Mid-Autumn Festival, which celebrates the overthrow of the Mongols during the end of the Yuan Dynasty in China, is as important in China as turkeys are in holidays in the West.

It is said that secret messages carried in mooncakes helped lead to the uprising that deposed the Mongol Dynasty (1206-1370 AD). Nowadays the festival – which falls in the 8th month of the Chinese lunar calendar -- is considered a family day when family members gather, celebrate with colorful lantern processions – and to eat mooncakes.

Hours after the program was broadcast on CCTV, an angry audience made numerous calls to television stations to denounce the company. On the afternoon of September 3, Nanjing Municipal Sanitation Supervision Bureau scurried to check the company’s workshop. They shut down the shop, ordered a full-scale inspection and found below-standard raw materials.

These included 70 boxes of hawthorn lotus nut paste with a use-by date of September 18, 2000 and seven barrels of lotus nut paste that were made on November 19, 2000, also long past their expiration date. Some mooncake additives were found with use-by dates that had expired four years previously. To cap things off, inspectors found dozens of packaged-for-sale “Guanshengyuan Mini Mooncake” stamped September 5 – even though it was only September 3 when at the time of the inspection.

A food company that makes mooncakes can usually count on 50 percent of its annual profit to be made through mooncakes production several weeks before the Mid-Autumn Festival. So not enough production to meet market demand means nothing a big cut in profits. Manufacturers have got to make precise production plans and exhaust every possibility to cut down on cost. But overproduction can also cost. And, mooncake makers never sell this seasonal food on discount even though there is little demand after the Festival. To some companies, recycling the leftovers that can account for over 70 percent of the total raw material cost seemed to be the best way.

Huang Jiansheng, director of the Food & Cosmetic Products Administration Department under the Health Ministry, said: “The Food Sanitation Law bans the use of expired ingredients in food products. Food Sanitation departments will strike hard companies that recycling addle and expired food.”

But the state has fallen short of issuing a regulation on recycling of food products that have not yet reached their use-by date and semi-manufacturered products. Thus some manufacturers believe the recycled stuffing is a semi-manufacturered product and they have broken no law. Even some food safety experts are unclear about whether mooncakes that have not reached their expiration date are qualified for recycling.

In an interview by CCTV on August 2000, Wu Zhenzhong, general manager of Nanjing Guanshengyuan Food Co, claimed that: “The use of old mooncake stuffing is not restricted as long as no quality problems are found. Recycling fillings is a standard practice in China’s mooncake industry.”

Consumers apparently disagree. Though the company may not have broken law, consumers can’t accept that such a famous company used old fillings to make mooncakes, when they already bring a high profit.

Besides, as people show more concern to their health and figures, the heavy-oily, sweet mooncakes are gradually moving out of popularity. People today usually buy this festival food more for its symbolic value for the holiday rather than for food.

The price of mooncake has been rocketing for decades. A box of four units of mooncake (250g/per unit) costs less than US$2.3 (20 yuan) to make but sells for US$12.5 (100 yuan). And the packaging usually cost more than 50 percent of the price and even up to 70 to 80 percent among the so-called elite mooncake brands. So to some extent, consumers are not buying mooncakes but rather the packaging, claimed by manufacturers to carry the essence of Mid-autumn Culture.

High price means high profits for manufacturers and for some other groups. Though unreasonable price hinders common consumers, those who do group buying for business offices and other workplaces can get a secret discount from the set price that will go to line their own pockets. This illegal profit helps support the exorbitant price. Some manufacturers specifically design luxury packages for consumers who need mooncakes as gifts or paybacks for favors, rather than food for family members. Some mooncake packaging contains tea, wine, gold ornament or even a Rolex watch in the name of a “high-quality gift.” In Nanning City, Guangxi Province, a big restaurant made ten boxes of mooncake priced at US$591 (4888 yuan) each that contained six mini mooncakes, a pure gold medal, a big ruby, shark fin, abalone and other precious food. All these mooncakes were sold out before 5th September, about a month from the Mid-autumn Festival, probably to buyers who will take them as gifts for others.

Despite all this, the tolerant average consumer has always bought the special mooncake treat for the Mid-Autumn holiday. But not this time.

Consumers’ resentment has conspired to ignite retaliation against the whole industry. First, people refused to buy any mooncake related to Nanjing Guanshengyuan Food Co., then they began to exercise caution against all brands: If a big, established company with nearly 70 years’ history uses old filling, what might other small, unknown companies do? How much profits do mooncake producers need to make since averaging a nearly 100 percent return could not keep them from using recycled filling?

In a telephone sample survey done by Beijing Youth Daily in Beijing, 42.5 percent of the 270 interviewed showed much concern about the food safety and quality of mooncakes in the Beijing marketplace. Some 36.2 percent of those surveyed said that they would not feel sorry if they could not have mooncakes for this year’s Festival. Only a slim 1 percent said they had no worries about mooncakes and will not make any changes in their traditional plans to eat mooncakes at the Festival. In another questionnaire survey done by the Social Survey Institute of China, over 60 percent of the surveyed said the Nanjing Guanshengyuan incident will likely make them change their habits, and 25 percent complained that they have been bothered by so many shabby food products that this time didn’t have a big impact on them. But they would prefer not to buy. And 14 percent said they definitely would not buy any mooncakes this year.

As of this writing, statistics from the mooncake association indicate that the mooncake market has shrunk 40 percent from the expected value of US$4.83 billion (40 billion yuan) to US $6.04 billion (50 billion yuan).

The most devastated companies are surely those also under the umbrella name of Guanshengyuan, even though they are independent companies.

Guanshenyuan takes its name from its founder, Guansheng Xian, who set up over 20 branches in China’s major cities. After 1949, when all the branches were turned over to their local business departments, the branches still share the name although they are independent business operations.

Now several hundred companies including around 10 successors of Xian’s branches do business under the name of Guanshengyuan. After these companies’ repeated defense of their products through notices in the mass media, consumers are mad enough that are still likely to reject any mooncakes related to the name of Guanshengyuan, even though they understand the situation.

“We will suffer a loss of 70 to 80 percent in revenue this year,” Cai Zukang, the general manager of Shanghai Guanshengyuan, said. “Of the 12 major markets all round the country, Shanghai Guanshengyuan has been kicked out of Shijiangzhuang City, Zhengzhou City, Wuhan City, Fuzhou City and Zibo City and soon will lose Beijing as well.”

Even though Xindu Guanshengyuan in Sichuan Province markets mooncakes under the brand name of Xindu, the “Guanshengyuan” in its name still drove over 1,000 dealers to withdraw orders amounting in value to US$1.57 million (13 million yuan).

On September 14th, the State Administration of Quality Supervision and Quarantine released a food safety report on 99 types of mooncake from 91 enterprises in Beijing, Shanghai, Guangdong, Zhejiang and other 18 regions. Ninety-five -- or 96 percent -- of these mooncakes passed the state requirements, the highest percentage since the administration started the test from 1999. But the market remains negative, and it appears that this year, mooncake makers will have little to celebrate on October 1.

(china.org.cn by Alex sources from CCTV, Beijing Youth Daily , Chinese Entrepreneurs Daily, China News Service, Xinhua News Agency 09/27/2001)