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Current as of 26/05/17 07:40PM NZST
The Business Herald’s markets and banking reporter.

Fonterra on notice in China

Country which takes $3 billion of NZ dairy products will not tolerate another slip-up: expert.

Chinese consumers are highly sensitive to any news of adulterants in dairy products. Photo / AP
Chinese consumers are highly sensitive to any news of adulterants in dairy products. Photo / AP

China will not tolerate another slip-up from Fonterra, with the dairy giant caught up in its third contamination scare there since 2008, says a marketing expert.

New Zealand's clean, green image is being rabidly attacked in the Chinese media after revelations at the weekend that a number of the dairy firm's customers used whey protein that may be contaminated with botulism-causing bacteria to manufacture consumer products, including infant formula.

In an editorial article the state-run Xinhua news agency, widely regarded as a mouthpiece of China's Government, went as far as saying this country's 100 per cent Pure tourism campaign is now a "festering sore" and suggested New Zealand would be abandoned by its major trading partners if "systemic" food safety issues were not fixed.

The botulism scare follows January's dicyandiamide (DCD) debacle, when traces of the nitrate inhibitor used on farmland were found in Fonterra milk, prompting an outcry from Chinese consumers highly sensitive to any news of adulterants in dairy products.

Fonterra also had a joint venture with Sanlu, one of the companies caught up in the 2008 melamine scandal that killed at least six babies and made hundreds of thousands ill.

Market commentator Arthur Lim said Chinese consumers would expect a senior Fonterra figure to lose their job as a result of the latest crisis.

"That is a requirement, unfortunately, because in Asia you need to be seen to be taking very decisive action," Lim said. "There has to be high-profile accountability."

Massey University associate professor of marketing Henry Chung said consumers in the Asian superpower would want to know what Fonterra was doing to ensure another contamination scare did not occur. China, which consumes around $3 billion of New Zealand dairy products a year, would not tolerate another slip-up from the dairy giant, Chung said.

Prime Minister John Key said an inquiry would be launched and Fonterra would have to give assurances that it would not become involved in another contamination scare.

"There are fundamental differences between the three particular scares Fonterra has had over the past five years," Key said. "The slightly worrying thing about this case is this is the one that directly links back to Fonterra."

James Bickford, New Zealand managing director of global branding agency Interbrand, said large organisations "stumbled" from time to time.

"But consumers are only going to accept it so many times," Bickford said. "If it happens a fourth time they [Fonterra] will be seriously thinking, 'What are our options?"'

Units in the Fonterra Shareholders' Fund closed up 9c yesterday at $6.95.

- NZ Herald

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