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Liam Dann 's Opinion

Business editor of the NZ Herald

Liam Dann: The world's watching you Fonterra

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Protestors outside a Fonterra plant in Colombo, Sri Lanka last year after the August botulism contamination scare. The world is now paying closer attention to Fonterra. AP Photo/Sanka Gayashan
Protestors outside a Fonterra plant in Colombo, Sri Lanka last year after the August botulism contamination scare. The world is now paying closer attention to Fonterra. AP Photo/Sanka Gayashan

Here we go again, a new year and a new contamination scare for Fonterra. Hopes that it had put its food safety troubles behind it have been dashed right on the eve of a court battle with French rival Danone which is seeking compensation for damage done to its brand during last year's crisis.

We need to keep this latest issue with E.coli in perspective of course - 9000 bottles of cream is a drop in the ocean of dairy products Fonterra produces everyday. Also, and crucially, this is not an export issue, it is domestic issue.

Fonterra brands New Zealand is effectively a different business to the massive milk powder producing operation at the centre of last year's botulism false alarm.

A specific, localised event such as this one is also far less significant for the whole industry than the controversy about DCD fertiliser residues which upset Chinese importers this time last year.

While the science confirmed that DCD levels detected in dairy product were within safe limits for human consumption, the issue was so broad that it hung heavily over the entire dairy export sector.

In fact if it were not for Fonterra's troubles last year this latest issue would be minor but in the high stakes international dairy trade, consumer perceptions are king.

Globally Fonterra's relatively anonymous status as a wholesaler of dairy ingredients has thus far shielded it from any serious commercial damage. But as these issues continue to make headlines in foreign media Fonterra's name recognition is no doubt growing - and for the wrong reasons.

Already the E.coli recall has been picked up Reuters and Bloomberg and made headlines in The Wall Street Journal and Singapore's Straits Times websites.

It will not go unnoticed in China.

The events of last year have left the company highly exposed and the Catch 22 is that with greater vigilance the company is more likely to identify issues, however minor, and under more pressure to go public with them.

If it has really learned its lessons form the botulism fiasco then it will have processes in place to manage consumer fallout and should in time shake off any perception issues about its food safety record.

But this recall won't help and the world will be watching.

Liam Dann

Business editor of the NZ Herald

Liam Dann is the Business editor of the New Zealand Herald, overseeing all our business content in print and online. 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.

Read more by Liam Dann

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