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August 2013
Fonterra ‘should have given early warning’ By Hugh de Lacy
Waving the yellow flag when it first got hints of possible botulism contamination in a Waikato plant would have saved Fonterra waving the red one and recalling product four months later. Page 21
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That’s the initial judgement of Lincoln University’s Professor Keith Woodford to the fallout from Fonterra’s announcement this month that it had a ‘potential quality issue’ (the company’s term) over botulism in whey concentrate produced at the Hautapu plant back in March. By the time Fonterra admitted the problem, the concentrate had been further processed into 900 tonnes of other products, including infant formula and calf feed, several consignments of which had to be recalled. That resulted in the temporary closure of a raft of Fonterra’s overseas markets, including big customers China and Russia. Botulism is a potentially fatal disease that causes muscular paralysis, with victims dying of asphyxiation or heart failure. The contaminated product was recalled before it caused any illness. Woodford said the full facts of the scare won’t be known until the separate Fonterra and
Government inquiries have been completed, the Fonterra one towards the end of next month. “All we know for sure is that Fonterra made a total mess of the communications,” Woodford told Canterbury Farming. “The fundamental problem is that apparently an orange flag was raised in March but it took more than four months before there was a product recall. “The inquiries need to ascertain the reasons for that delay.” The Hautapu plant produces about 80,000 tonnes of product a year, 3% of the giant cooperative’s total output. “A key problem from Fonterra’s perspective is likely to be that back in March they did not know how extensive the problem might be. “If they had made a recall at that time then they would possibly have had to put a temporary recall on many thousands of tonnes of product. “A likely outcome of the Government inquiry is that this is what they should have done,” Woodford said.
That Fonterra botched its communications strategy even after the problem was made public is borne out by the subsequent resignation of the managing director of New Zealand Milk Products, Gary Romano. He was the face of Fonterra immediately after the announcement because the recently appointed chief executive, Dutchman Theo Spierings, was in Europe. While Spierings made a dash to China to reassure that critical market, Romano was left to flounder through a succession of press conferences. A chemical engineer, Romano joined Fonterra predecessor New Zealand Dairy Group in 1997, but did not join Fonterra until 2005. He has also worked for Australian aluminium company Alcoa, for the Boston Consulting Group and for Dairy Partners America. Unless the inquiries show that he was ultimately responsible for the contamination in the Hautapu pipes, it’s likely that his resignation, which became
effective immediately, was a sop to the media and worried customers. Certainly, Fonterra was quick to exonerate Spierings of any responsibility, with company chairman John Wilson, who refused to front the media until a week after the announcement, telling the 10,500 shareholder/ suppliers in a letter that the board had confidence in the chief executive’s handling of the situation. After taking over the main media role from Romano, Spierings told staff in a letter copied to suppliers that, “We did the right things but didn’t always get things right.” Woodford said there was no doubt that the scare had done New Zealand’s reputation as a
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safe food producer “considerable harm. This will take time to repair, but fortunately for New Zealand, the world in general and China in particular will still need New Zealand’s dairy products.” He said Fonterra and the New Zealand Government had made “a correct step” by apologising to China for the scare. “The next necessary step is that we put measures in place to ensure we don’t have a repeat performance. “One thing we can be sure of is that in future the rules around yellow flags and the appropriate responses are going to be a lot tighter,” Woodford said.