COUNTERFEIT SIMILAC FOUND IN CALIFORNIA

RICHARD TURCSIK

OAKLAND, Calif. -- Retailers are being urged to closely monitor their infant formula distribution channels after counterfeit Similac infant formula was found on the shelves of several California supermarkets operated by Safeway here and one other operator.

The counterfeit Similac was found earlier this month on the shelves of about 50 Safeway and Pak 'N Save banner stores operated by the Northern California division of Safeway, as well as a single Food Palace unit in San Diego.

"Retailers should be sure to be careful about their suppliers and be sure that they are dealing with reputable suppliers with established reputations. That is extremely important," said Robert Gelardi, executive director of the Infant Formula Council in Atlanta.

"It is important for all of us, and particularly the retailers, to be alert that counterfeiting is a possibility. It has happened once, and obviously we don't want it to happen again. And by being aware of the situation, hopefully they can prevent it," he said.

Food and Drug Administration officials said they are continuing to investigate how the counterfeit Similac made its way onto supermarket shelves. Authorities arrested Ivy K. Ong, of Mission Viejo, Calif., earlier this month and charged him with trafficking in counterfeit goods. FDA officials said additional arrests were still expected to be made.

One source close to the investigation, who did not wish to be named, said it looked like diverting was allowed somewhere along the line.

"It is very obvious from the scenario with a product being counterfeited that at some point something had to be diverted to

get it into the places," he said.

However, Burt Flickinger, a food industry consultant with A.T. Kearney, New York, said baby formula is typically not a diverted product.

"The allowance levels on that type of product are so narrow that it typically is only 2% to 3% of case costs. There is just no money in diverting it in the way there would be seafood or coffee," he said. "Most retailers are selling close to cost on the product as a traffic draw and the manufacturers are spending most of their advertising costs on doctor detailing, working with industry medical associations, etc."

He said the product probably made its way onto the shelves of Safeway as a result of outsourcing.

"Today so many grocery chains and mass merchandisers are outsourcing a lot of their operations for continuous logistics. What typically happens is it comes in from a secondary supplier because there is no profit in carrying products like that through the warehouse," he said.

Debra Lambert, a Safeway spokeswoman, said Safeway was unsure where the counterfeit product entered its distribution system since the chain uses a "multitude" of different suppliers. She said the chain pulled 4,000 counterfeit cans off its shelves, which is less than a day's supply of Similac sold in the division.

"There was no way to identify the product because even the cases themselves looked exactly the same. We've been working closely with the FDA all the way, as well as taking extraordinary procedures of double- and triple-checking all of the stores just to be sure," she said.

Rod Audo, a manager at the single-unit Food Palace, said he was not sure where the infant formula entered his distribution channel because the formula goes through several distributors before it reaches his store.

"I never found out who the main source was," he said. "We immediately notified our customers to bring the formula back and exchange it for another can of Similac."

Although all the counterfeit formula was believed to be found, Donald MacLearn, a spokesman at FDA headquarters in Rockville, Md., said the investigation has been made "broader than Safeway."

He said the counterfeiting job was "very slick" and the only easy way to tell the counterfeit product without opening the container is that it is packaged with the following lot numbers on the bottom of the can: 87532RB [space] APR96 [second line] 0341 and then 87532RB [space] APR96.

Inside, the counterfeit containers have clear scoops, rather than Similac's green scoop, and the formula is milky white, rather than the creamy yellow of Similac.

"I have seen the counterfeit product next to the real product and there is no way an average consumer will look at that label and detect the very subtle minor label changes," he said.

Brenda Burris, a spokeswoman at the Columbus, Ohio-based Ross Products division of Abbott Laboratories, Abbott Park, Ill., which manufactures Similac, said Ross became aware of the counterfeiting in early February. "We had three or four calls come in from the same part of the country saying 'this doesn't look like my regular Similac.' We had the product flown in immediately, looked at it and recognized that it was not ours. We called the FDA and also the Safeway stores," she said.