Fonterra tries to contain China scandal

Fonterra tries to contain China scandal

Baby milk formula has become a hugely sensitive product in China after at least six children died, and 300,000 others were sickened, by formula laced with the industrial chemical melamine in 2008. The company at the heart of that scandal, Sanlu, was 43pc owned by Fonterra.

However, Fonterra profited from the previous scare. Chinese parents, anxious over their single children, turned to foreign milk powder brands, which now have 80pc of the market in the country’s largest cities.

And Fonterra provides the base milk powder for many of those brands. Nearly 90pc of China’s £1.24 billion in milk powder imports last year originated in New Zealand, with the majority coming from Fonterra.

In a bid to reassure investors and the public, Mr Spierings emphasised that only 38 tonnes out of the company’s 2.5m tonne annual production had been found to be dangerous.

The problem began in May 2012, when a “rarely used” pipe in a Fonterra factory in New Zealand contaminated a batch of whey protein with clostridium, a bacteria that can cause botulism.

The problem was not picked up in tests at the time, said Mr Spierings, and 20 tonnes were sent to three animal feed makers, Coca Cola (which used some of it to make Minute Maid juice), Vitaco, an Australian drinks company and Wahaha, China’s largest beverage company.

In March, Fonterra began to process some of the remaining 18 tonnes into baby formula and detected the bacterium. Mr Spiering said the company had then run tests, in the intervening four months, before discovering that the strain of clostridium could be harmful. “I only heard the results two days ago and I flew straight here,” he said.

China has imposed a strict watch on all New Zealand dairy products and has blocked the import any more whey protein powder and infant formula base. But Mr Spierings suggested the Chinese government would remove the block as soon as Fonterra provides the contaminated batch numbers and details of its processing facilities.

He said almost all the contaminated products had now been found, and that the company is working with Danone to locate the six batches of contaminated Dumex baby milk formula that have been released into the market. “None of the products tested by Dumex in China have reported problems,” he said. “There have been no customer complaints.”

Mr Spierings added that the facility that contaminated the batch had been closed for seven weeks of routine maintenance and cleaning immediately afterwards.

Several supermarkets began to clear the shelves of Dumex products while some market stalls marked down the price of other Fonterra-linked products. The price of Japanese baby formula has quadrupled, according to one dealer.

The scandal drew sharp criticism from the New Zealand prime minister, John Key.

“When your whole business is about food safety and food quality, you think they would take such a precautionary view to these things and say if it’s testing for some reason in an odd way that (the product) would just be discarded till they’re absolutely sure it’s right,” he said.

He said Fonterra was New Zealand’s flagship and the issue went right to the “heart of undermining consumer confidence”.

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