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New Zealand PM accuses milk scare firm of 'staggering' delay
by Staff Writers
Wellington (AFP) Aug 05, 2013

New Zealand's 'clean' green' image hurt by milk scare
Wellington (AFP) Aug 05, 2013 - New Zealand has long marketed itself as "100 percent pure", but experts say that image is under threat amid fears of botulism contamination in its baby formula and other milk products.

The crisis gripping dairy giant Fonterra has implications for the entire country because of its importance to the economy and the damage being done to New Zealand's brand in China, its fastest growing export market, said communications expert Chris Galloway.

"New Zealand's image and that of Fonterra's can't be separated, they are intertwined," Massey University's Galloway told AFP. "Fonterra is our largest exporter and represents New Zealand in markets around the world.

"This crisis is a blow to our 100 percent pure branding and the repercussions might take some time to play out."

New Zealand largely shuns intensive farming methods and its cows feed on rolling pastures rather than feed lots, helping it foster a reputation for producing "clean, green" products.

The image is particularly valuable in Asia and especially China, where a series of food scandals have undermined trust in local products.

But Prime Minister John Key has acknowledged that New Zealand will face a tough task restoring confidence in markets such as China after a potentially deadly bug that can cause botulism was found in some Fonterra products.

While isolating the cause of the contamination, a dirty pipe in a North Island processing plan, and destroying the affected goods was relatively simple, Key said he feared the affair would damage international customers' perceptions of New Zealand goods.

"The risk is the consumers themselves saying, 'I'm wary of this now'... this goes to heart of undermining confidence," he told Radio New Zealand.

A clearly frustrated Key questioned why Fonterra took so long to sound the alarm, saying the company knew it could not afford to take risks with people's health.

Fonterra's CEO Theo Spierings, speaking at a news conference in Beijing, denied any delay. He insisted that the company had informed customers and the authorities within 24 hours of confirming the problem.

Galloway, who specialises in crisis communications, said the situation was all the more critical because it involved products aimed at newborn babies and it was not the first health scare Fonterra had been involved in.

"The repetition makes it harder for people to accept that this is an isolated incident," he said, referring to a 2008 scandal when six children died and more than 300,000 fell ill after China's Sanlu, which was part-owned by Fonterra, illegally laced milk with the chemical melamine.

No cases of illness have been reported in the latest contamination scare but Fairfax Media's Manawatu Standard, which covers the North Island's dairy heartland, said it appeared Fonterra had not improved its crisis management in the past five years.

"What is more worrying than the scare itself is the way Fonterra has handled it, appearing to learn little from the Sanlu melamine scandal of 2008," it said in an editorial.

Galloway said complete transparency was the only way for companies to deal with bad news, meaning Fonterra was struggling for credibility after being accused by the government of sitting on information about the contamination.

But branding expert Mike Lee from the University of Auckland said if foreign authorities were satisfied with Fonterra's actions following the scare, the company could recover.

"Demand (for milk) is outstripping supply basically," Lee told The New Zealand Herald.

"Obviously there has been a temporary loss in the share value of Fonterra but I think as long is this is something that they handle well (they could recover)."

New Zealand Prime Minister John Key on Monday accused dairy giant Fonterra of delaying sounding the alarm over products tainted with a potentially fatal bug, as investors sent the company's shares tumbling.

Fonterra revealed on Saturday that a whey product used to make infant formula and sports drinks had been contaminated with a bacteria that can cause botulism.

The announcement prompted immediate action from China, a major market for New Zealand's dairy products, which ordered recalls of some potentially-tainted products and demanded affected importers check their sales records.

Key said he was concerned at the impact on farm-reliant New Zealand's reputation as a supplier of "clean, green" dairy products, particularly in Asia, where its infant formula has long been regarded as gold standard.

Key said that tests last year showed there were problems with three batches of whey, adding it was difficult to understand why Fonterra did not act immediately.

"I'm a bit staggered that in May of 2012, when this whey was produced, that it (Fonterra) did show something in its testing, but clearly not something that was of concern to the company because they allowed it to go out," he told Radio New Zealand.

"You would have thought that for a business where its top business is essentially based around consumer confidence, food safety and the quality of its products, that they are risks that you wouldn't take."

Fonterra has not yet responded to the claim.

Key said the government had a team of more than 60 personnel working to contain the fallout from the contamination and would eventually seek a "forensic" examination of how Fonterra had handled the crisis.

Chris Galloway, a senior lecturer in public relations at Massey University, said there were concerns Fonterra had not learned the lessons of a 2008 scandal when six children died and more than 300,000 fell ill after one if its part-owned Chinese partners illegally laced milk with the chemical melamine.

"The repetition makes it harder for people to accept that this is an isolated incident," he told AFP.

The Fonterra Shareholders' Fund fell 8.7 percent at the open on the New Zealand stock exchange as investors had their first chance to react to the scare, later recovering slightly to be down 5.9 percent at NZ$6.70 around midday.

The countries that the contaminated whey was exported to include Australia, China, Malaysia, Saudi Arabia, Thailand and Vietnam.

State media reported late Sunday that one of three Chinese companies that used the potentially tainted material, baby formula firm Dumex, has been ordered to "track down its sales records".

The other two companies ordered to stop selling products containing questionable ingredients were Hangzhou Wahaha and Coca-Cola's Chinese subsidiary.

Wahaha said that it had used the Fonterra ingredients in soft drinks and had not detected any bacteria.

Coca-Cola said in a statement it had used 25 kilograms of the affected powder for its Minute Maid drinks, but the "super high temperature" used in production meant it would be safe to consume. The firm added that it was nevertheless recalling the affected products.

There are reports that Russia has recalled Fonterra products and advised customers not to buy them.

Singapore has also recalled some Fonterra-linked baby milk products, saying it was a precautionary move.

Fonterra said there had been no reports of illness linked to consumption of the tainted product, which contains the bacteria Clostridium botulinum, which can cause botulism, an infection that can lead to paralysis and death.

The company has blamed the contamination on a dirty pipe at a North Island processing plant.

The New Zealand Infant Formula Exporters Association said none of the products made by its members were affected but it had been caught in a global backlash due to the poor quality of information being released by Fonterra.

"There wasn't full and frank disclosure right at the beginning and this has led to a lot of rumours spreading in the marketplace, which is what we're seeking to counter now," spokesman Chris Claridge told TVNZ.

New Zealand is the world's largest dairy exporter and the NZ$10.4 billion ($8.1 billion) sector accounts for about 25 percent of its exports.

Fonterra accounted for 89 percent of New Zealand's milk production in 2011, collecting 15.4 billion litres, according to the company's website.


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