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Current as of 29/05/17 06:00PM NZST
NZ Herald business editor at large

Liam Dann: Apology just the start to rebuilding reputation

Fonterra is so big it can afford to sail on through these meltdowns without changing course. Photo / Christine Cornege
Fonterra is so big it can afford to sail on through these meltdowns without changing course. Photo / Christine Cornege

Fonterra chief executive Theo Spierings has apologised to New Zealand but this is just the start and he will need to do more.

His apology was carefully worded and clearly vetted by lawyers. Fonterra is sorry for the stress and anxiety this situation has caused.

Spierings' press conference performance yesterday was polished and he has well-structured answers to many of the questions the public has on timing issues.

But he has failed to acknowledge, or has failed to grasp, the extent of the reputational damage Fonterra's blunders - across three food scares - have done to New Zealand's image in its largest export market.

Fonterra, predictably, has escaped any material financial damage to its bottom line. The latest global dairy auction was a success in terms of demand for New Zealand milk powder holding steady.

But this is what always happens. Fonterra is so big it can afford to sail on through these meltdowns without changing course.

The reality is that the bulk of its earnings come from a brandless wholesale business that does not rely on consumer reputation. As long as Fonterra reassures its giant food industry customers, it will continue to deliver good returns to its farmers.

Time and time again we have seen Fonterra fall back on the comfort of this commodity business despite having the development of its brands business at the top of its to-do list for 13 years.

Other New Zealand exporters to China are not so lucky. The hundreds of small players exporting there are the ones to whom Fonterra owes its apology. Without our clean-green image what are they supposed to rely on to sell their goods in China? They are left with price, a low-cost model, which is what our efforts - countless hours and millions of dollars of marketing over the past decade - have been trying to move beyond.

Spierings' experience in China over the past few days seems to have involved typically polite and diplomatic face-to-face relations with Chinese officials. His advisers, or the Ministry of Foreign Affairs and Trade, need to sit down with him and show him the stacks of negative press piling high in the Chinese media.

Suddenly New Zealand is fair game. New Zealand has a huge reputational issue to deal with and Fonterra will be doing our business community a great disservice if it underplays that. It owes it to New Zealand business to lead the charge to rebuild our reputation.

On Twitter: @liamdann

- NZ Herald

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NZ Herald business editor at large

Liam Dann is business editor at large at the New Zealand Herald. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy. He hosts The Economy Hub video show every Thursday.

Read more by Liam Dann

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