Danone seeks Fonterra compensation over botulism scare

Agence France-Presse

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Danone says the scare last August, which turned out to be a false alarm, had harmed the company and it was launching legal action

CENTER OF CONTROVERSY. A photo taken on August 12, 2013, shows Fonterra's Hautapu dairy factory located near the rural town of Cambridge, some 150 km south of New Zealand's largest city, Auckland. AFP/William West

WELLINGTON, New Zealand – French dairy giant Danone said Thursday, January 9, it will sue New Zealand farming cooperative Fonterra for compensation over a botulism scare last year that forced global recalls of baby formula.

Danone said the scare last August, which turned out to be a false alarm, had harmed the company and it was launching legal action seeking redress in the New Zealand High Court.

“This affair illustrates serious failings on Fonterra’s part in applying the quality standards required in the food industry,” Danone said in a statement issued by its Paris head office.

Danone did not reveal how much compensation it wanted, saying the figure was a matter for the courts to determine. Howeer, the company estimated late last year that the crisis had cost it 300 million euros ($407 million).

The company also said it had cancelled its supply contract with Fonterra, a grouping of about 13,000 New Zealand farmers that accounts for about a third of the world’s dairy exports.

It did not say how much the supply contract was worth.

Fonterra said it will “vigorously defend” the legal action and was disappointed Danone had abandoned commercial discussions in favor of going to the courts.

“Fonterra stands by its track record of having world-class food safety and quality standards, quality systems, and robust testing regimes across all its manufacturing facilities,” it said in a statement.

Fonterra has denied any legal liability for Danone’s losses and said in its 2013 accounts released in September that it had set aside just NZ$14 million ($11.6 million) to cover any claims arising from the crisis.

The scare erupted in August when Fonterra announced a whey protein used in baby formula and some other products had tested positive for a bacteria linked to botulism, which can cause paralysis or death.

The scare led to infant formula being pulled off shelves from China to Saudi Arabia before subsequent tests determined the bug was actually another, non-toxic, bacteria strain.

Most of the recalled formula tins were Danone brands, although US-based Abbott Laboratories also recalled product in parts of Asia, estimating in September that the disruption would cost it US$90 million in the final quarter of 2013.

Abbott has not announced any legal action against Fonterra.

The episode dented New Zealand’s reputation for producing the gold-standard formula that commands top prices in lucrative Asian markets.

It also revived memories of a 2008 scandal when six children died and another 300,000 fell ill in China after a local company part-owned by Fonterra illegally laced milk with the chemical melamine. – Rappler.com

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