Fonterra braces for possible legal action
Print Edition
New Zealand dairy exporter Fonterra may face legal action from France’s Danone over the recall of infant formula containing a potentially contaminated Fonterra ingredient, the company said yesterday.
In August, Fonterra said it had found a potentially fatal ingredient contained in a range of products sold by a number of multinational companies.
After recalls were issued across nine countries including China and Malaysia, the food safety scare turned out to be a false alarm because the ingredient was found to contain a less harmful bacteria.
Danone is seeking full compensation for what it says were 350 million euros (US$476 million) in lost sales following the recall of its infant formula products in Asia and New Zealand.
The two sides started negotiations in October to try to resolve the dispute.
“We’re still in talks (with Danone),” Fonterra CEO Theo Spierings said. “I put a commercial proposition on the table at the end of October and I haven’t heard back on that proposition.
“If their counterproposal is commercial, I would of course entertain a commercial discussion. If their reply is legal, then we would have a different discussion.”
A Danone spokeswoman said the group was “still in talks” with Fonterra and would make no further comment.
In October, Danone said it was taking longer than expected to recover from the recall of high-margin infant formula. It also cut its sales, profitability and free cash flow goals for 2013 at that time.
Baby food accounts for 20 percent of Danone’s revenue, second only to its dairy business, and Asia, notably China, is a key growth market for the group at a time of sluggish demand in Europe.
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