Fonterra CEO sorry for milk scare, denies cover-up

(UPDATED) New Zealand's dairy industry -- which accounts for 25% of the country's total exports -- will be particularly concerned about the damage caused to its reputation in China

Customers visit a Fonterra stall during a Baby Fair in Hong Kong on August 5, 2013. Photo by AFP / Dale de la Rey

BEIJING, China (UPDATED) – New Zealand dairy giant Fonterra apologized Monday, August 5, for a botulism scare that saw product recalls and seizures from China to Saudi Arabia, but denied accusations it delayed releasing information.

“We deeply apologize to the people who have been affected,” CEO Theo Spierings told a news conference in Beijing, capital of the world’s biggest market for baby formula.

But he insisted that the company had informed customers and the authorities within 24 hours of confirming the contamination problem.

Fonterra revealed at the weekend that a whey product used to make baby milk and soft drinks had been contaminated with a bacteria that can cause botulism, a potentially fatal disease.

Fonterra is the world’s largest dairy co-operative and New Zealand’s biggest company, accounting for 89% of the country’s milk production — 15.4 billion liters — in 2011 and recording turnover of US$15.7 billion last year.

The scare saw restrictions put on Fonterra products imported into China while Dumex and Karicare, both subsidiaries of French food giant Danone, issued recalls in China, Hong Kong, Malaysia, Singapore, Thailand and New Zealand.

Authorities in Russia also ordered a recall of Fonterra’s products and advised consumers against using them, domestic reports said, while New Zealand and Vietnam both warned parents to avoid some types of Karicare formula.

In Saudi Arabia authorities said they had seized a batch of affected formula and it would be destroyed.

‘Staggering’ delay in relaying info

New Zealand’s dairy industry — which accounts for 25% of the country’s total exports — will be particularly concerned about the damage caused to its reputation in China, by far its most important market.

It has long promoted itself as a supplier of “clean, green” dairy products, particularly in China, where consumers distrust domestically-made products after a series of food safety scandals — the worst of them involving a company linked to Fonterra.

A New Zealand minister said China had banned all imports of milk powder from the country, but there was no Chinese confirmation and Spierings said there were “restrictions” on Fonterra’s whey products.

“We totally understand the concern among parents,” he told reporters. “Parents have the right to know that infant nutrition and other dairy-related products are 100 percent safe.”

New Zealand Prime Minister John Key had earlier Monday accused the company of a “staggering” delay in revealing the contamination.

Tests had shown “something” when the batch was produced in May 2012 but the company “allowed it to go out”, Key told Radio New Zealand.

Spierings said the first signs of a problem only emerged after tests in March this year, when further tests had been needed to identify “the root cause and the exact strain” of bacteria involved.

“That takes time,” he said. “On July 31 we got that message and we went out 24 hours later in the proper way to inform our customers and to inform the NZ government.”

No lesson learned?

Aside from Danone’s Dumex, the other two companies affected in China, Hangzhou Wahaha and Coca-Cola’s Chinese subsidiary, who used the whey in soft drinks, both said their products were safe but they would recall them as a precaution.

Chris Galloway, a senior lecturer in public relations at Massey University, said there were concerns Fonterra had not learned the lessons of a 2008 scandal when six children died and more than 300,000 fell ill after one of its part-owned Chinese partners, Sanlu, illegally laced milk with the chemical melamine.

“The repetition makes it harder for people to accept that this is an isolated incident,” he told AFP.

But some Chinese still put their faith in foreign brands.

Only one Chinese baby milk manufacturer has so far been affected by the scare and there were no signs of panic buying at supermarkets.

“No matter how bad imported milk is, I will never buy domestically made baby formula,” said one poster on China’s hugely popular Twitter-like microblogging site, Sina Weibo.

Fonterra said there had been no reports of illness linked to consumption of the tainted product, which contains the Clostridium botulinum bacteria, which can cause botulism, an infection that can lead to paralysis and death.

The company has blamed the contamination on a dirty pipe at a North Island processing plant.

About 95% of China’s milk powder imports in January-March came from New Zealand, up by a third on the same period in 2012, a government website reported in April.

Fonterra shares closed down 3.65% at NZ$6.86 in Wellington, while Danone shares were down 0.71% to 59.96 euros in mid-morning trade in Paris. –

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