Fonterra fined $183m over contamination scandal

New Zealand’s Fonterra has been ordered to pay 105 million euros (NZ$183 million) in damages to French food giant Danone as a result of the Fonterra food safety failures of 2013.

Danone had sued Fonterra as a result of the whey protein concentrate contamination scandal in 2013, when Fonterra quarantined several batches over fears it was contaminated with clostridium bacteria. It later turned out to be a false alarm.

Danone launched a legal suit in New Zealand and arbitration proceedings in Singapore, seeking restoration for the costs of recalling the whey protein concentrate.

At the time, Fonterra said it expected any court action would show the Kiwi firm didn’t have any liability in the contract, and it recognised a contingent liability of just $14m over the recall.

In 2014, New Zealand’s Court of Appeal upheld an earlier decision that the Singapore arbitration proceedings should be the first avenue, as provided for in the contract, but refused to permanently stay the legal suit.

The result of the Singapore proceedings was released on Friday, and Danone says it “welcomes” the decision.

Food fraud is a reoccuring problem; expired milk powder resold

Substituting for cheaper, or expired inputs, or adding supplemental ingredients isn’t new in the food world. As long as there have been food, there has been food fraud.

Melamine in dog food, horse meat in beef lasagne or seagull meat mixed with other protein sources have all garnered attention and research. Food manufacturers in China, a huge and still growing food export market, have been fingered in multiple fraud cases. The latest incident, according to Stuff, centers around reselling expired milk powder.

Chinese police on Monday (NZT) arrested 19 people in Shanghai for selling about 300 tonnes of expired Fonterra milk powder, Shanghai Daily reported.

The suspects were allegedly managing a company, which was packaging expired products of the New Zealand dairy company – one of the most popular brands in China – into smaller packages for resale below market prices, according to media reports.

After a months-long investigation, the police discovered that one of the suspects sold the expired products to another company, who in turn allegedly resold almost 200 tonnes to distributors in Shanghai and in the Jiangsu, Henan and Qinghai provinces, who sold them on e-commerce platforms or in wholesale.

The authorities have seized 100 tonnes of these products and have shut down the websites selling them.

Fonterra spokeswoman Maree Wilson said on Monday night it supported the enforcement steps taken by Chinese officials.

“The Chinese authorities have acted strongly and swiftly to investigate and arrest the people they believe are responsible for this and we fully support their actions.
“Food safety is our top priority and we are committed to providing safe and high quality dairy products.

“We work actively with our direct customers to ensure the integrity of our products. This includes providing guidelines on how to manage expired product in a responsible way.

“In this case there appears to have been criminal activity much further along the supply chain.

“While we believe this is an isolated criminal incident, we are reviewing the case internally.”

Wilson said that, to Fonterra’s knowledge, the milk powder was not being resold with Fonterra packaging.


Safe food is good business: Fonterra still in a state of denial

Fran O’Sullivan writes in The New Zealand Herald that, there is one salient comment in the report by Queens Counsel Miriam Dean into the WPC80 incident that ought to give Fonterra’s directors and shareholders cause for concern: “A company that is more focused on its own commercial reputation in a crisis does so at its peril. Companies should think about consumer safety first and reputation second. If consumers lose trust in a company, that will be its undoing.”

communicationThe inquiry into the “WPC80 incident: causes and responses” provides plenty of evidence that Fonterra broke this most basic rule for a food industry company leading up to and during the false botulism scare. Throughout the crisis – and the events that gave rise to it – the company was slow to put food safety as its priority because it did not have the appropriate culture.

It was instead focused on production and market share.

This aspect has to some extent been glossed over in the prior Fonterra management report and the review undertaken by the Fonterra board itself.

These reports have talked about a “silo mentality” and “Fortress Fonterra”.

But these are simply manifestations of the lack of clear communications platforms (and adherence to them) that existed at the food co-operative in August 2013 when the crisis emerged. It is not the fundamental issue.

What is more compelling is the fact that staff cut corners when they shouldn’t have; food traceability systems were lacking, the liaison with AgResearch over the tests of the suspect whey protein concentrate was a joke; the management and board did not meet their obligations to report the suspected contamination to the Ministry of Primary Industries within agreed deadlines; Fonterra went out to the market with wrong information about a customer’s products (Karicare) costing that company massive brand damage, and, did not apply a rigorous fact checking process before issuing communications.

Or as my friend Gary noted, good risk communicators are hard to find.

Food safety culture has really jumped the shark: Fonterra profit focus damaging says botulism report

Food safety culture was a cool concept to try and talk about all the incidentals in delivering safe food. me, it was when one employee was with another in the bathroom and one left without washing their hands, the culture would support the other employee saying, dude, wash your hands.

But the term was abrogated when Maple Leaf Foods started talking about their culture, rather than offering a clear time-line of who-knew-what-when, making Listeria test results publicly available, and putting warning labels on their deli meats, as Publix has done.

It jumped the shark.

If there’s any further proof required, Fonterra of New Zealand’s response to the latest inquiry on the botulism (not) in raw milk was, “The reason we’re welcoming it, is because it’s hugely important to raise the prominence of the food-safety culture with our food processes here in New Zealand.”


According to media accounts, Fonterra focused on profits at the expense of a food safety culture, damaging New Zealand’s international reputation.

Earlier this year, Fonterra was fined $300,000 for the incident, which saw milk-products pulled off shelves when it emerged they were potentially contaminated with Botulism. 

Fonterra was late in notifying the correct authorities and it caused an international scare, particularly in China, with Fonterra unable to confirm for several days where the products, which had been produced more than a year earlier, were around the world.

Further testing showed that the risk of botulism never existed, although the false alarm prompted a review of New Zealand’s food safety system.

The last of a series of independent reports was released today, and the inquiry, led by Queen’s Counsel Miriam Dean, found a number of errors were made. 

While food-safety protocols were in place, the culture of care around food safety had not been fostered.

Problems dated back to May 2012, when Fonterra reworked some of its concentrated whey using temporary pipes and hoses at the Hautapu plant in Waikato in a way not approved by regulators, which increased the risk of bacteria. were cleaned using a caustic (rather than acid) solution, which failed to eliminate all contamination.

The report also found that having notified the ministry, days late in August 2013, Fonterra had no well-prepared group crisis plan to implement, including crisis communications (particularly in social media).

“Fonterra took until 18 August to trace all the affected products, a seriously deficient effort.

“Fonterra did not effectively co-ordinate its actions with those of the ministry, Danone and the Government during the crisis,” the report said.

The Ministry for Primary Affairs did not escape unscathed.  

“The ministry had no single, coherent (or reviewed or rehearsed) crisis plan for a food incident that it could implement straight away after receiving notification of C. botulism.

But Dean noted the ministry’s response was hampered by Fonterra’s late notification and overstating the certainty botulism, as well as Fonterra’s drawn-out and deficient tracing.

Dean described the incident as a “watershed moment”. 

“Fonterra realized in a most profound way that food safety was the one thing without which it was impossible to achieve any other company priority, whether continued sales and profits, a sound reputation, strong consumer confidence or a secure future on the world stage,” she said.

Labour immediately called for an independent food safety authority (New Zealand used to have one; good folks).

“It’s the only way that we can ensure the very highest levels of food safety and an independence that reassures our customers in the international market,” primary industries spokesman Damian O’Connor said.

New Zealand needs a “world-leading” food safety regime, he said. “This report has been a sad indictment of what has taken place… The culture, right from the farm through to the market-place has to improve.”

Fonterra chief executive Theo Spierings acknowledged the report and said the co-operative would study its findings and recommendations.

“Food safety and quality are our number one priority. At the time of the recall, we did what was right based on the evidence we had. It was subsequently confirmed that the recalled WPC80 did not present a health risk.”


Stop the nonsense about culture: Food producers should truthfully market their microbial food safety programs, coupled with behavioral-based food safety systems that foster a positive food safety from farm-to-fork. The best producers and processors will go far beyond the lowest common denominator of government and should be rewarded in the marketplace. should pay attention.

I coach hockey in Australia, where 5-year-olds and 10-year-olds are on the ice at the same time, and I say, pay attention. Because that 10-year-old can wipe you out.

Just like some unexpected bug or a false positive.

Culture is nice, but pay attention and serve your consumers the data to back up the bullshit statement that every food CEO makes during an outbreak: food safety is our top priority.

Stop making people barf.

And it was nice the work of me and Chapman and our collaborators was cited throughout the report.

Government Inquiry into the Whey Protein Concentrate Contamination Incident


Six months have passed since the Inquiry began stage two of its examination of New Zealand’s biggest food safety scare. That scare, as most people will vividly remember, was sparked by suspicion that infant formula and possibly other products, too, were infected with botulism-causing C. botulinum. In this final stage, the Inquiry has looked closely at the causes of the incident, together with the responses by Fonterra and the Ministry for Primary Industries and the roles of others. The distance of time has enabled the Inquiry to take a considered view of just how it was that the extraordinary events came to pass. At all times, it has endeavoured to do so through the lens of food safety, including its examination of the state of readiness of key participants to respond to unfolding events. The contributions of those who assisted, from providing documents, briefing papers and written submissions, to participating in long interviews, are gratefully acknowledged. All were prepared to review the events in question openly and honestly. The Inquiry is particularly appreciative of the assistance from

the core participants: Fonterra, the ministry, AsureQuality, AgResearch and Danone. The Inquiry is indebted to Kelley Reeve, Ned Fletcher, Sally Johnston and Annette Spoerlein as the secretariat and to Simon Mount as legal advisor; also our scientific advisor, Dr Lisa Szabo, chief scientist of Australia’s NSW Food Authority, and our independent peer reviewer, Professor Alan Reilly, chief executive of the Food Safety Authority of Ireland. We cannot thank Peter Riordan enough for his enormous contribution in assisting with the writing of this report. Also, Susan Buchanan for editing and proofing; Jacqui Spragg as designer; Jill Marwood and Maria Svensen for secretarial and administration assistance; and finally staff at the Department of Internal Affairs. As with the first stage, it was a pleasure to work with them all. It took this incident to raise awareness that food safety cannot be taken for granted. Lessons learned from the incident provide an opportunity for all participants in the dairy food safety system – and indeed wider – to step up and meet the challenges ahead. Consumers expect no less. But the Inquiry hopes that this final report can draw this particular chapter to a close, in the knowledge that all participants will continue to work together to ensure New Zealand remains a world leader in dairy food safety.


The news in August 2013 of potential Clostridium botulinum contamination made global headlines. In New Zealand, it was received with something approaching disbelief, in part because the country prided itself on exporting food of the highest quality. The truth is, our food was, and still is, safe, wholesome and among the best in the world. But the botulism scare, as many call the WPC80

incident, led to a review of the dairy industry’s food safety framework, a matter dealt with in the Inquiry’s first report. That report concluded that the

regulatory framework was fundamentally sound, but recommended improvements. Underlying many of these was the idea that the dairy industry must anticipate future risks as well as counter existing known threats. Now, in stage two, the Inquiry has turned to a detailed examination of what began with a simple breaking of a torch lens in a Waikato dairy factory and ended in the recall of millions of product items. How did something so insignificant come to have

consequences so enormous? This report answers that question. The Inquiry is tempted to describe the account as fascinating – and certainly it is likely

to be so for those at arm’s length from New Zealand’s biggest food safety incident. However, for those involved, or who felt its serious financial repercussions, the word grim might be more apt. Between the torch breakage on 1 February 2012 and Fonterra’s notification of C. botulinum on 2 August 2013, numerous people made decisions that, one by one, added their small contribution to the building momentum of events. Sometimes, those events seemed to take on a life of their own, but they were entirely avoidable – if a strong food safety culture had thrived in the workplace. Some readers will wonder why the various individuals involved did not heed the warning signs or take the precautions that were so apparent afterwards. But to yield to that temptation would be to underestimate the complexity of the events and also to undervalue the good intentions of all those involved (many of whom, the Inquiry can vouch, worked days on end after the crisis broke, trying to regain control of the situation). key immediate causes are relatively easy to determine (although the findings on pages 7-8 give a comprehensive list). They are:

• The Hautapu plant’s improvised reprocessing of WPC80, without a risk assessment and in breach of its risk management programme

• The Fonterra research centre’s encouragement of C. botulinum testing without sufficiently considering its purpose, justification and potential implications

• The decision to approve “toxin testing” without appreciating that this meant authorizing C. botulinum testing

• Fonterra’s failure to advise both the Ministry for Primary Industries and its customers much sooner of a potential food safety problem. The direct causes do not tell the whole story. Wider factors had an influence on the crisis as a whole. Identifying those enabled the Inquiry to understand more fully why the incident happened and to compile a lessons section especially for the industry (see pages 10-11).

Contributing factors included:

Organisational pressures: Fonterra’s workplace culture exhibited an entrenched “silo” mentality that robbed the company of some of the cohesion so vital in an organisation of its size. Both internal and external pressures also contributed to missed opportunities to correct the course of events. Communication, both within and between parts of the organisation, was often unclear – symbolised most starkly by a manager’s unwitting authorisation of C. botulinum testing. And there was also a lack of adequate escalation procedures to deal with possible food safety problems.


Testing: Fonterra and AgResearch, the research institute that tested Fonterra’s WPC80 samples, approached this work from different perspectives.

Communication lacked the precision and formality that might have halted testing or shifted it to a diagnostic laboratory and produced a different result.

Readiness: The ill-prepared inevitably pay a heavy price in a crisis. Fonterra was not ready for a crisis of this magnitude. It lacked an updated, wellrehearsed crisis plan to implement, as well as a crisis management team that could spring into

action. The ministry also lacked a single, coherent food incident plan to implement straight away.

fonzi.jump.the.sharkResponses: The WPC80 incident had a long and largely unobserved prelude, followed by a short, very public conclusion. The second phase placed most of the main participants in the crisis, but particularly Fonterra, under intense pressure to act swiftly, decisively and in concert. This did not always happen. Partly, the underperformance was the result of insufficient preparedness and partly, Fonterra’s tracing problems.

With a single phone call on 2 August, the ministry was confronted with a raft of public health, trade, market access, tracing, infant formula supply and media problems. Many aspects of its response deserve credit, especially its decision to put public health first and urge a recall, knowing that more definitive test results would be weeks away.

Its decision-making, however, could have been more rigorous and science-based. All parties could also have co-ordinated better during the crisis.

Tracing: This was an undeniably complex task. The 37.8 tonnes of WPC80 manufactured in May 2012 had, by August 2013, made their way into thousands of tonnes of products in various markets.

Nonetheless, Fonterra’s tracing efforts were, for different reasons, seriously deficient. That, in turn, hampered both the ministry and Fonterra’s customers in their tracing of the affected production. Fonterra’s initial estimate was well off

the mark. It would take the company a further 16 days, and numerous amendments, before it arrived at a final, conclusive figure that enabled all

suspected production to be identified.

Food safety culture: A food safety programme and a food safety culture are entirely different. One is concerned with documentation and processes, the other with employee behaviour and a top-to-bottom commitment to putting food safety first.

The Inquiry has explored this in detail, because if Fonterra had possessed a strong food safety culture, this incident would probably not have happened.

But good can come out of bad. The WPC80 incident has spurred Fonterra into a series of comprehensive changes, from boardroom to factory floor, especially aimed at strengthening food safety and quality and crisis management capability. The ministry, too, has taken matters swiftly in hand. During the past 12 months, it has created a regulation and assurance branch devoted more or less solely to food safety. No one now can be in any doubt about where responsibility for food safety sits.

The ministry is also preparing a new crisis response model for implementation in 2015.

All those changes are welcome and will put the ministry and the country’s biggest dairy company on a better footing in the event of another food safety incident (as well as protecting consumers and New Zealand’s economy and reputation).

Other changes may follow, too. This report contains recommendations specifically for consideration by the Government and the ministry, which would, among other things, strengthen scientific expertise, auditing, crisis planning and non-routine reworking procedures. The report also draws lessons from the WPC80 incident that could be useful for the dairy industry and wider food manufacturing sector. These would strengthen the food safety cultures, manufacturing processes and crisis planning of other companies, as well as clarify laboratory testing processes.

But perhaps the most important lesson here is one of attitude. As United States food safety expert Debby Newslow puts it: “We can no longer learn

from our mistakes; we cannot allow mistakes to happen. In today’s world of food safety, we must be proactive and prevent mistakes from occurring.”

Sri Lanka temporarily halts some Fonterra milk product sales after illness

New Zealand’s Fonterra’s still got some problems after Sri Lanka suspended the sale of some Anchor milk powder after some children consumed the product and fell ill, government health officials said on Sunday.

Anchor-milk-BHowever Fonterra, a New Zealand dairy giant, said independent investigations into the three batches concerned proved that they were safe to consume.

The health ministry suspended the distribution and sale of the three batches of Anchor following a complaint of food poisoning in some children in the southern village of Girandurukotte, 224 km (140 miles) from the capital Colombo.

Senerath Bandara, the secretary of Sri Lanka’s public health inspectors’ association, said the Health Services had ordered inspectors to confiscate all stocks of the three batches.
“We have been ordered to hold them until the investigations are over following the reports that several kids had fallen ill after consuming the milk powder,” Bandara told Reuters.
The health ministry has sent the Anchor milk powder packets of the relevant batches for laboratory testing, officials said.

Sanath Mahawithanage, Fonterra Brands Sri Lanka Associate Director for Scientific and Regulatory Affairs, said, “Our investigations conducted on samples from these three batches by internationally accredited independent laboratories confirm that there is no food safety or quality issue.”

Mahawithanage said the company is waiting for health ministry direction after its own local tests and the outcome of their investigation.

Fonterra boosting food safety after last year’s recall

Fonterra Co-operative Group, the world’s biggest dairy exporter, is on track in lifting the quality of its food safety processes, nine months after an independent review into its handling of last year’s false alarm food scare.

UnknownThe Auckland-based company has completed audits of 75 per cent of its plants globally and has embarked on necessary improvements and maintenance where needed, put in place protocols to engage external scientific and diagnostic resources and written food and safety quality into all senior management employment contracts, it said in a statement. It’s also set up an incident management team, created a food safety and quality council, and appointed Greg McCullough as head of food safety and quality.

Food safety is crucial in China deal for baby milk

Six years ago, when tainted infant formula killed six babies in China and sickened 300,000, one of the biggest foreign investors in the sector was caught by surprise.

The investor, the Fonterra Cooperative Group of New Zealand, one of the world’s largest dairy companies, had put millions of dollars into a partnership with the Sanlu Group, a Chinese maker of infant formula that was one of several found to have mixed an industrial chemical into milk powder to artificially raise protein readings.

Sanlu was declared bankrupt, and four of its executives were imprisoned. Fonterra was forced to write down the entirety of its investment of 200 million New Zealand dollars, or about $167 million at current exchange rates, in the Chinese venture.

Yet on Wednesday, Fonterra became the latest foreign company to make a new bet that it could turn a profit by bringing safer food to China. The company said it would spend more than $500 million in a deal with the Beingmate Baby and Child Food Company, a Chinese manufacturer of infant formula. A day earlier, Kohlberg Kravis Roberts, an American private equity giant, announced an investment of about $400 million in China’s largest chicken breeder, Fujian Sunner Development, in a deal intended to improve food safety and quality.

“China is a completely different environment now; Beingmate is a completely different partner,” Theo Spierings, the chief executive of Fonterra, said on Wednesday in response to questions from reporters about the Sanlu episode, according to Reuters. “We are very focused on learning from the past and moving on to the future.”

Maybe use better tests? Fonterra cuts blamed on botulism scare

After a crappy botulism test sparked falling demand for New Zealand-based Fonterra dairy products, the company is now going to axe about 110 jobs at a Hamilton packing site, a union official says.

fonterra.aug_.13-300x253The Dairy Workers Union official told Fairfax Media Fonterra was slashing the jobs at Canpac, in Foreman Rd, by about a third after last year’s botulism scare.

The dairy co-operative called a snap meeting of all Canpac staff this morning to tell them it was cutting back the operation to a 24-hour day, five days a week after a drop in sales volume on products packaged there.

It had been a 24 hours, seven days a week operation since expanding in 2007 on the back of the commodities boom.

Dairy Workers Union national secretary Chris Flatt said a Fonterra presentation had admitted food-safety scares played a part in Canpac losing work.

Because people need edumacating: New Zealand seeks proposals for Food Safety Science Centre

New Zealand dairy producer Fonterra made a mess of a supposed botulism positive test, and then decided to keep it secret, leading to a $150,000 fine. pink.floyd.educationWhile paying attention to verification and validity, the NZ government also decided the plebs need educating. 
Science and Innovation Minister Steven Joyce and Food Safety Minister Nikki Kaye have invited seven organisations to participate in a Request for Proposals (RfP) to host the Food Safety Science and Research Centre. “The Centre is being established to promote, co-ordinate, and deliver food safety science and research, in response to a key recommendation from the Government Inquiry into the Whey Protein Concentrate (WPC) Contamination incident,” Ms Kaye says. “Progress on establishing the Centre is integral to ensuring New Zealand’s food safety system remains among the best in the world by focusing on cutting-edge, internationally recognized research into key aspects of food safety. The RfP can be found here:

Fonterra fined $150,000 for keeping quiet on botulism

Fonterra has been fined $150,000d by The New Zealand Markets Disciplinary Tribunal for breaching continuous disclosure requirements to the NZX during the dairy manufacturer and exporter’s botulism false alarm last August.

fonterra.aug.13Auckland-based Fonterra undertook a world wide recall after it quarantined several batches of whey protein concentrate last August on concern it was contaminated with a potentially dangerous strain of Clostridium bacteria, capable of causing botulism. The strain was ultimately shown to be harmless.

The dairy company first knew of the potential contamination on Wednesday July 31 but did not make the information public or inform the market until just after midnight on Friday August 2. Options in New Zealand’s largest company trade on the Fonterra Shareholders’ Market and allow dairy farmers to trade shares between themselves in a private market, while units in the Fonterra Shareholders’ Fund give ordinary investors access to the dividend stream.

Fonterra Shareholders’ Fund units closed at $7.12 on Friday August 2, before the company announced the contamination. When the market reopened on Monday August 5 the units traded at an intraday low of $6.50 and closed at $6.86, the tribunal said. A similar reaction was observed on the private dairy farmers’ share trading market.