Danone to sue Fonterra after recall due to scare
Print Edition
French food group Danone said yesterday that it would sue wholesale dairy exporter Fonterra and stop buying products from the New Zealand firm following a contamination scare that sparked the recall of infant milk formula across Asia.
The world’s largest yogurt maker did not say how much money it was seeking, but it previously said it wanted full compensation for what it says were 350 million euros (US$476 million) in lost sales following the recall of the company’s Dumex and Karicare infant formula products.
Danone buys a range of dairy ingredients from Fonterra, but is one of its biggest customers for milk powder, according to analysts who cover the sector. Fonterra, which said it would contest the suit “vigorously,” declined to give details on its sales to the French firm.
Danone has said that Fonterra supplied about 16 percent of the milk ingredients for its baby food business, which accounts for 20 percent of its total revenue.
In August, Fonterra said it had found a potentially fatal ingredient in a range of products sold by multinational companies. After recalls were issued across nine markets including China, the scare turned out to be a false alarm because the ingredient was found to contain a less harmful bacteria.
In a statement, Danone said it was starting proceedings in the New Zealand High Court against the world’s largest dairy processor, as well as arbitration proceedings in Singapore to bring all facts to light and obtain compensation.
The company said it was also terminating its supply contract with Fonterra and would make any further collaboration contingent on a commitment by Fonterra to full transparency and compliance with Danone’s food safety procedures.
“This affair illustrates serious failings on Fonterra’s part in applying the quality standards required in the food industry,” Danone said.
Danone said it would source products from other firms, without elaborating. Other potential suppliers could include Glanbia and Arla Foods.
Some dairy brands in China, for example, have started to look to diversify.
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