The market has taken Fonterra's latest food scare "in its stride" and an analyst said any reputational damage would depend on how the issue was treated in international media in the coming days.
Dairy co-operative Fonterra on Monday night issued an urgent recall of four of its fresh cream products over fears it may contain the E.coli bacterium.
Almost 9000 bottles of Anchor and Pams branded cream, which have been distributed to shops and food service outlets across the North Island, are affected by the recall.
Fonterra Brands NZ managing director Peter McClure said signs of E.coli were discovered during standard testing on Monday morning.
It is the second piece of bad news for New Zealand's biggest exporter this week and follows French food-processing giant Danone filing proceedings against Fonterra in an attempt to gain compensation for losses it says it suffered as a result of the botulism false alarm.
Units in the NZX-listed Fonterra Shareholders' Fund closed up 5c at $5.68.
Hamilton Hindin Greene director James Smalley said yesterday the market appeared to have taken the news "within its stride" and the situation was different from the botulism scare.
Unlike last August's botulism crisis, this food scare is restricted only to New Zealand. It also doesn't involve milk powder, which is a big export product for the dairy giant.
However, Smalley said the scare could cause Fonterra reputational damage depending on how the issue was picked up by foreign media.
The news received coverage yesterday on the Wall St Journal website and Chinese news agency Xinhua, which said: "New Zealand's food safety regime was in the spotlight again" as Fonterra recalled "yet another product".
"Hopefully this time [Fonterra] will do a better job maybe putting it into perspective," Smalley said.
"Because last time as we know I think it was a false positive and it was only quite a small amount of material that was actually affected ... but once it gets outside the country it can get blown out of proportion. So one would hope they would have learned, from the botulism scare I guess, how to deal with these types of issues a bit better.
"The question will be over the coming days whether anything greater will be made of it [in international media]. Because I think with the botulism one it did take a while for that negative momentum almost to really fire up."
Federated Farmers dairy chairman Willy Leferink said Fonterra's recall showed its quality assurance systems worked.
"While the timing is far from ideal given what went on last year, this is a voluntary recall initiated by Fonterra's own testing. I hope it shows our consumers that a company owned by thousands of Kiwi farmers does put food safety first," he said.
"It should also tell our consumers that when a Fonterra-owned brand is on the shelf, someone back at Fonterra is testing it to ensure it remains safe to consume.
"When testing does find a problem, then no matter what the product is, or the timing, a voluntary recall is completely justified."
Affected batch numbers
*Pams Cream 500ml - 1400684206 - best before date 21/01/2014
*Anchor Cream 500ml - 1400684207 - best before date 21/01/2014
*Anchor Cream 300ml - 1400684208 - best before date 21/01/2014
*Pams Cream 300ml - 1400684209 - best before date 21/01/2014.