Global Economy
New Zealand's dairy giant Fonterra in another health scare
By Finfacts Team
Aug 6, 2013 - 6:29 AM

Fonterra's Whareroa factory with Mt Taranaki in the background. Image: Fonterra

New Zealand's dairy giant Fonterra, the world's biggest dairy exporter, finds itself in another health scare that is damaging its potential in a key overseas market, China.

New Zealand's government has warned that exported dairy products, including infant formula could contain a bacteria that could lead to botulism - - a potentially fatal illness. It said the contaminated whey protein concentrate, or products using this ingredient, had been exported to Australia, China, Malaysia, Saudi Arabia, Thailand and Vietnam.

Fonterra, which manufactured the product more than a year ago, said eight customers had been advised and were investigating whether any of the affected product was in their supply chains.

The company said Chinese authorities have temporarily suspended importation of whey powder and dairy base powder (a whey based dairy ingredient used in the manufacture of infant formula) produced by Fonterra, or produced in Australia using Fonterra’s whey protein powder as an ingredient (including whey protein concentrate).

China has also increased inspection and supervision at the border for New Zealand dairy products, and indicated extra testing may be required.

Fonterra said it initially identified a potential quality issue in March this year, when a product tested positive for Clostridium. There are hundreds of different strains of Clostridium, the majority of which are harmless. 

Product samples were put through intensive testing over the following months.  Last Wednesday tests indicated the potential presence of a strain of Clostridium (Clostridium Botulinum) in a sample, which can cause botulism. 

The contaminated products were produced at a single New Zealand manufacturing site at Whareroa, in May 2012 where dirty pipe was identified as the source.

China

Chinese consumers have been suspicious about infant milk formula since news broke about the 2008 tainted milk scandal, where dangerous levels of melamine, a chemical that mimics the properties of protein, enabled producers to water down milk without apparently diluting its nutritional value, left six Chinese children dead and sickened nearly 300,000 others.

Fonterra, New Zealand's biggest exporter, which sells 371,000 tonnes of infant formula each year to China, had owned a stake in one of the companies at the centre of the scandal, the now-closed Sanlu Group.

New Zealand economy

John Kay, New Zealand prime minister, has promised to investigate Fonterra. "There is no question this does damage to New Zealand and to Fonterra," he said Monday. "There will be a couple of inquiries. The first will be about Fonterra itself," he said. Key has raised questions about the length of time it took Fonterra to make the situation public.

Fonterra is the biggest company in New Zealand and is responsible for almost 90% of the country's milk production.

Dairy exports account for about a quarter of New Zealand's export earnings and the dairy industry contributes about 7% of the country's gross domestic product.

New Zealand accounts for one-third of the world's cross-border trade in dairy products.

Fonterra, the world's largest dairy exporter, reported revenues of NZ$19.8bn ($15.5bn) in the 2012 financial year. It has a global payroll of 16,000 people.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25