An independent inquiry into Fonterra's botulism debacle has
found the dairy co-operative failed to recognise the
"explosive reputational risk'' involved in the scare.
The inquiry - which was commissioned by the dairy company's
board - today released its findings and recommendations at a
media briefing in Auckland.
A list of "things that went wrong"included the "belated
recognition (and delayed escalation to senior management and
the board) of the explosive reputational risk involved''.
Fonterra failed to "join the dots"between botulism, infant
food products, consumer sensitivities, and Fonterra's global
reputation, the report said.
The inquiry also found "no single event or individual"caused
the contamination scare and that the dairy co-op suffered
international damage to its reputation.
"Changes are not optional ... They are vital,'' said inquiry
chairman Sir Ralph Norris.
Fonterra chairman John Wilson said the inquiry gave him
confidence that the company could recover from the scare.
"It (the inquiry report) really focuses the mind,'' Wilson
The report also found there was "some lack of
alignment"between the Government and Fonterra during the
first "critical fortnight"of the scare.
The board has made five principal recommendations, listed
1. The board should endorse explicitly as a core principle
that Fonterra, as "one company", always strives to perform at
the best practice level for leading global food product
2. The board should explicitly
endorse the paramount importance of food quality and safety
to Fonterra's global and local reputation.
3. The "risk"component of the board's Audit, Finance and Risk
Committee should be transferred to, and developed by, a new
4. The board should accept greater responsibility for
developing and maintaining relationships at the most senior
levels of Fonterra's external stakeholders, including in
government and media, within and outside New Zealand.
5. The board should actively review ongoing progress towards
shedding the adverse "Fortress Fonterra"perception held by a
material proportion of external stakeholders.
Dairy products, including infant formula, were withdrawn in
more than seven countries in August after Fonterra suspected
that 38 tonnes of whey protein had been contaminated with a
Further testing showed it was a false alarm and the bacterium
present in the whey protein was harmless.
The contamination debacle strained relations with China,
which imported $3 billion worth of Kiwi dairy products in the
year to June.
French-owned New Zealand infant formula brand Karicare was
also forced to recall 67,000 cans of product in this country.
The Fonterra Shareholders' Council, which represents the
co-operative's 10,500 farmer shareholders, welcomed today's
"In the short term the Council will review the report
thoroughly and meet with the Fonterra Board in November to
discuss it further. Following this we will share our view of
the report with our Farmer Shareholders,'' said chairman Ian
The actions required of Fonterra as recommended in the report
seemed prudent, said Brown.
"That the report is public and the Inquiry Team has
recommended that they review Fonterra's progress on their
recommendations in nine and 18 months time gives us
confidence that there is real intent on Fonterra's part to
Fonterra announced the findings of its internal, operational
review of the botulism scare in September, which revealed
reprocessing after plastic was found in whey protein at its
Hautapu plant in the Waikato led to the contamination event.
At that time Fonterra chief executive Theo Spierings also
said the crisis hadn't been "escalated" fast enough.
The results of a Government inquiry into the scare are yet to
- by Christopher Adams of the NZ Herald