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Current as of 26/11/14 01:40PM NZST

Christopher Adams

The Business Herald’s markets and banking reporter.

Danone says botulism scare cost it $500m

Danone's Nutricia Karicare baby formula, one of the products recalled after the recent Fonterra contaminated whey scare.
Danone's Nutricia Karicare baby formula, one of the products recalled after the recent Fonterra contaminated whey scare.

French food giant Danone says it will lose more than half a billion dollars in sales in the current financial year as a result of Fonterra's botulism false alarm.

The Paris-based company's infant formula products were recalled in eight countries, including New Zealand and China, after Fonterra wrongly suspected that 38 tonnes of whey protein, had been contaminated with a botulism-causing bacterium.

Danone was hardest hit in China, where consumers remain highly sensitive to food safety scares following the 2008 melamine scandal, when six babies died and thousands more became sick after consuming dairy products tainted with the industrial chemical.

In New Zealand, Danone-owned Nutricia had to recall 67,000 cans of its Karicare infant formula brand.

The company said the incident would have a "significant impact" on its 2013 results, with full-year lost sales estimated at 350 million euro (NZ$562.2 million) and lost margin estimated at 280 million euro (NZ$449.8 million).

Sales in its baby nutrition division fell 8.6 per cent to 924 million euro (NZ$1.5 billion) in the third quarter as a result of the contamination scare.

Total group sales for the first nine months of this year rose 5.5 per cent to 16.3 billion euro (NZ$26.2 billion), Danone said.

Shares in the company fell more than 2 per cent to around 51.80 euro in Paris following the sales result.

Danone has said it wants "full compensation" from Fonterra for damages caused to its business during the botulism scare.

At the China Business Summit in Auckland yesterday, Fonterra chief executive Theo Spierings said a "she'll be right attitude" was one of the causes of the contamination false alarm.

He said Fonterra was world class in manufacturing and food safety but still needed to "lift its game".

"That was one of the key learnings [of the botulism scare] - a 'she'll be right' attitude is not acceptable," he said.

Spierings said Fonterra needed to become "the Nasa of food safety and quality".

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