Comment: New Year, same problems for Fonterra

Here we go again, a new year and a new contamination scare for Fonterra, writes Liam Dann, New Zealand Herald Business Editor

Hopes that it had put its food safety troubles behind it have been dashed right on the eve of a court battle with French rival Danone which is seeking compensation for damage done to its brand during last year's crisis.

We need to keep this latest issue with E.coli in perspective of course - 9000 bottles of cream is a drop in the ocean of dairy products Fonterra produces every day. Also, and crucially, this is not an export issue but a domestic one.

Fonterra Brands New Zealand is effectively a different business to the massive milk powder-producing operation at the centre of last year's false alarm around botulism contamination.

A specific localised event such as this latest one is also far less significant for the whole industry than the controversy about DCD fertiliser residues which upset Chinese importers this time last year.

While the science confirmed that DCD levels detected in dairy product were within safe limits for human consumption, the issue was so broad that it hung heavily over the entire dairy export sector.

In fact were it not for Fonterra's troubles last year this latest issue would be minor, but in the high stakes international dairy trade consumer perceptions are king.

Globally Fonterra's relatively anonymous status as a wholesaler of dairy ingredients has thus far shielded it from any serious commercial damage. But as these issues continue to make headlines in foreign media Fonterra's name recognition is no doubt growing - and for the wrong reasons.

Already the E.coli recall has been picked up Reuters and Bloomberg and made headlines on The Wall Street Journal and Singapore Straits Times websites.

It will not go unnoticed in China.

The events of last year have left the company highly exposed and the Catch 22 is that with greater vigilance the company is more likely to identify issues, however minor, and under more pressure to go public with them.

If it has really learned its lessons from the botulism fiasco then it will have processes in place to manage consumer fallout and should in time shake off any perception issues about its food safety record.

But this recall won't help and the world will be watching.

 

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