KEY POINTS:
Where's Henry? That is the question the Prime Minister should have asked before she gave Fonterra boss Andrew Ferrier a barely disguised "kick-in-the-butt" at her weekly press conference.
Henry van der Heyden - Fonterra's chairman - was shoulder-to-shoulder with Ferrier when the company fronted the media in April 2007 on the key proposed capital restructuring.
He was present in Beijing this April for the celebrations over the signing of the Chinese bilateral free trade agreement with New Zealand.
But even though he also chairs the Fonterra 13-strong board's external relations committee and sits on the critical audit, finance and risk committee which would have assessed the company's $174 million acquisition of a 43 per cent stake in San Lu, van der Heyden's voice has been strangely absent from the fray over melamine-contaminated infant powder.
It's time that the Fonterra chairman joined Ferrier in fronting up on this matter.
An investigation carried out on behalf of China State Council has found San Lu "lied about its contaminated baby milk formula for eight months while tens of thousands of infants got ill".
The State Council said the Chinese company was receiving complaints as far back as last December.
This revelation runs counter to messages put out by Fonterra last week suggesting San Lu was not aware of the contamination issue until the second quarter of 2008.
Couple this new revelation with other stories suggesting San Lu products had been contaminated with melamine as long ago as 2004 and there are real questions that have to be asked about Fonterra's risk assessment strategies, and the amount of due diligence that was undertaken before it bid for San Lu.
On Monday, Helen Clark opined that Fonterra "in reality didn't front for at least three days" once news broke over the infant formula scandal, and "then by video conference from Singapore" - a state of affairs that Clark found "less than adequate" from a communications perspective.
It is true that Ferrier had to turn around the next day and hotfoot it back to Auckland to face the local media in what would have been a personally testing news conference. He deserves credit for single-handedly fronting this crisis to date in what must have seemed an extremely lonely position.
But company communications are just the icing on the cake - it's what goes into the mixture in the first place that also needs to be addressed.
And on this score, Ferrier would have been only one of several cooks given the intensive use of directors in the company's affairs.
Fonterra will today release its latest annual result and forecast payout to farmers.
Fonterra acquired its stake in San Lu little more than two years ago
Already there is speculation that the company will ultimately have to make a multi-million dollar writedown of its San Lu assets if the brand cannot be resuscitated.
Much of today's announcement will concentrate on the level of future payouts as the international dairy commodities boom comes off the boil.
But China has to be on the menu.
In Beijing, Fonterra China head Bob Major, New Zealand Ambassador Tony Browne and a raft of commercial advisers including McKinsey's Andrew Grant have been assisting the dairy co-op to work its way through the crisis.
There are two immediate issues.
The first - what can Fonterra do to assist the Chinese in a humanitarian way to overcome the shortage of pure infant formula and milk powder?
The company has met Beijing officials on this score and has been scouring about to source extra product.
Trade Minister Phil Goff, who discussed the issue with Ferrier before he went to New York for the Pacific Four announcement, believed sourcing product was something "New Zealand can do as a country and that Fonterra can do as a big company that would assist the Chinese with the challenges they have got ahead of them at this time".
The Ministry of Foreign Affairs and Trade confirms that New Zealand has made a general offer of assistance if Chinese authorities needed anything from us. But on Saturday, MFAT said no request had been made.
Fonterra sources suggest an announcement is imminent.
The second major issue is whether San Lu is able to be resuscitated.
Fonterra will no doubt have commercial advisers working with it on this score since Chinese authorities shut down San Lu's operations and ordered all of its products off supermarket shelves.
The situation is complex.
While melamine contamination has been found in milk products made by China's biggest local dairy manufacturers - Yili, Mengniu and Bright Dairy - the amounts have been minuscule compared to the contamination levels in San Lu's infant formula.
Within New Zealand, some industry sources suggest Fonterra should use the opportunity to acquire 100 per cent control of San Lu. The notion is that Fonterra would have then have a China manufacturing base for a raft of products and the NZ company would have total control of the supply chain but still be able to access San Lu's distribution networks. Chinese workers will still have jobs and dairy farmers - who in some cases bought their cows as part of China's anti-poverty programme - could still sell milk.
This possible outcome is just one of a number of options that is likely to be on the table in Beijing talks.
Another issue facing Fonterra is a governance one. Two key board committees are integral to this situation.
The audit, finance and risk committee has five members including van der Heyden: Roger France, Earl Rattray, Jim van der Poel and Stuart Nattrass.
Van der Heyden also chairs the external relations committee which includes Rattray and Nattrass and is tasked with building relationships with political contacts and international trade policy contacts as well as with selected joint venture partners.
The principal activities of the audit, finance and risk committee include establishing and reviewing internal audit and global assurance processes; reviewing the internal control framework, significant risks, exposures and mitigation strategies and ensuring the timeliness and balance of disclosures on the affairs of the company.
This suggests that the directors on these committees would have been closely involved in the decisions over just who should front on the San Lu crisis and which strategies should be undertaken to mitigate risk.
San Lu is not an isolated factor in Fonterra's strategy. The dairy co-operative's goal is to be "one single integrated major player in the global dairy market"
But to do that, Fonterra needs to ensure it can run joint ventures adequately. In China its goal all along has been to be an integrated business that collects milk and moves up the chain into consumer and food service products.
Van der Heyden may argue that San Lu is just one of a number of offenders. But the centrepiece of the company's China strategy is now a shambles.
If it wants to convince other international companies it can run milk supply chains globally using joint ventures in countries like China and Brazil, it needs to do much better.
