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August 8, 2013

NZ: Fonterra CEO defends handling of botulism recall

Fonterra CEO Theo Spierings has insisted the dairy giant was "fully transparent" in its handling of the recall of whey protein contaminated with a bacteria that can cause botulism.

Fonterra CEO Theo Spierings has insisted the dairy giant was “fully transparent” in its handling of the recall of whey protein contaminated with a bacteria that can cause botulism.

Three batches of WPC80, shipped to eight customers in various markets, contained clostridium botulinum.

According to Spierings, while the safety risk was “extremely low” the New Zealand dairy giant acted responsibly and with “full transparency” to manage the situation.

“For us food safety, quality, throughout the supply chain is critical,” he said in a message to to farmers. “Here something went wrong in factory. These things happen. But we need to address the issue.”

Within the first 24 hours of being alerted to the issue, Fonterra had traced and contained the ingredient sent to six out of the eight customers who received it, Spierings said. “The nutritional customers were more difficult but today we can say all the product is contained. There is no health rise… no reports of sickness.”

Spierings also travelled directly to China in order to manage the situation on the ground there. Fonterra’s recall prompted infant formula on sale in China to be pulled from shelves.

“Our number one market in China is a… very sensitive market… We gave full transparency of the situation,” he said.

While the recall had the potential to damage Fonterra’s reputation for food safety, particularly in China, Spierings suggested the company’s reaction has minimised the damage caused. “Of course initially your reputation is at stake, no doubt about it. But 24 hours later, when I was talking to authorities and stakeholders in China, they said: ‘You did absolutely the right thing by going out, being transparent. Don’t hide.’

“There is definitely work to be done to restore our reputation, but we are going to work hard on this. You have to do the right things and this was the right thing to do.”

Spierings suggested the company’s actions have been supported and “appreciated” by the group’s customers, the food and beverage companies who have also been caught up in the recall. These have included Danone’s Dumex brand in China, Abbott Labratories, Wahaha and Coca Cola Co.

“Customers, of course they are concerned about their reputation because their name is connected to it, especially with nutritional customers. The people who got 20 tonnes direct and we came out in 24 hours – Coca Cola, Vitaco, Wahaha – it was contained within 24 hours there was no health risk. There was no reputational damage.”

However, for “nutritional customers” such as Danone and Abbott, Spierings conceded the situation was “more complex”.

“Of course they are concerned. I have been in contact with the CEOs of both companies, not once a day but 4-5 times a day from China and we were all focused on solving this problem… They were very appreciative of what we did,” Spierings suggested.

Danone and Abbott were both forced to recall infant formula in China and Danone also issued recalls in a number of other markets. 

Fonterra chairman John Wilson said it was “far too early to speculate” on the financial impact of the recall. However, he insisted Fonterra’s customers have “absolute confidence in the… Fonterra management team.”

While Wilson expressed confidence in management’s handling of the situation, he added the board is launching a review to assess what happened.

“There are serious lessons that need to be learnt from this, and that is why, in addition to the operational investigation our chief executive has already committed to, the board will be conducting a comprehensive formal review of its own.”

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