NZ: Fonterra "braces for Danone botulism lawsuit"

By Katy Askew | 2 December 2013

Fonterra expects legal action from Danone

Fonterra expects legal action from Danone

Fonterra is preparing itself for legal action from French dairy group Danone from the New Zealand firm's recall of concentrated whey powder earlier this year.

Addressing Fonterra's shareholders' fund meeting, chief executive Theo Spierings reportedly suggested that - while talks with Danone are ongoing - the prospect of legal action is looking more likely.

According to local reports, Spierings said Fonterra had worked "very hard for months" to reach a commercially viable settlement with Danone. "It appears to be a route that's not working out. There are only two ways you solve it: commercially or you go legal."

Spierings added that if the case did go to court, Fonterra had no liability.

In October, Danone missed third-quarter sales expectations and lowered its full-year outlook, blaming its recall of infant formula in Asia sparked by Fonterra's whey powder recall.

Danone baby food on sale in China and New Zealand was pulled from shelves in August after Fonterra, a supplier of ingredients to the Dumex and Karicare brand owner, warned some of its whey protein concentrate contained a bacteria that could cause botulism.

While it transpired the scare was a false alarm, Danone's result was hit by the immediate impact of the recall. The company suggested the damage done to its reputation was also having a more lasting impact on sales. 

Danone reduced guidance for sales to 4.5-5%, down from "at least" 5%. The company also lowered its margin forecast, estimating it would fall by 80 basis points, rather than an earlier prediction of a 30-50 basis point drop.

Danone had previously said it had Fonterra had entered into a "dispute resolution process", with the French group seeking damages after the recall.

Neither Danone nor Fonterra were available for comment at time of press.

Sectors: Baby food, Dairy

Companies: Fonterra, Danone

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