Fonterra on track in China - Theo Spierings

Fonterra chief executive Theo Spierings says his company's infant formula brand is going well in China. Photo/Richard Robinson

Fonterra chief executive Theo Spierings says the roll-out of the dairy co-op's infant formula brand in China is "on track" despite the ongoing fallout from the company's botulism fiasco.

Addressing the Trans Tasman Business Circle Luncheon in Auckland on Friday, Spierings said Fonterra's Anmum baby milk brand had been launched in Guangzhou at the beginning of September and was now being "tested" in 35 mother and baby stores in the southern Chinese city.

"It's on track," Spierings said. "From the looks of it it's very good."

Spierings pointed out that Anmum maternal formula - for pregnant women - was already sold in 65 Chinese cities and Fonterra could take advantage of those existing sales channels when it introduced the baby milk product to other parts of China.

"With these kind of out of the box channels to market we have to ensure the model is 100 per cent right before you start rolling it out to other cities."

Spierings has told Reuters that he expected Anmum infant formula to be available in 70 Chinese cities within three years and the co-op's expansion in China - particularly in branded products - was going "full steam ahead" while in other parts of the world, including India and Africa, some plans had been put on hold.

Small scale New Zealand baby milk exporters have said they are losing up to $2 million in weekly sales as a result of the botulism false alarm.

The scare followed Fonterra's revelation at the beginning of August that 38 tonnes of whey protein, used in a range of consumer products including infant formula made by French dairy giant Danone and sold in China, may have been contaminated with a botulism-causing bacterium.

News of the contamination - which turned out to be a false alarm after further testing was carried out - received widespread media coverage in the world's second-biggest economy, where parents remain highly sensitive to food safety scares.

In 2008 at least six babies died and thousands more became sick after consuming dairy products tainted with melamine, a toxic industrial chemical.

Fonterra's connection with the melamine disaster through its part ownership of Sanlu, one of the firms with contaminated milk products, put a big dent in its plans for China and is likely to have delayed the company's introduction of Anmum in the Chinese market.

Spierings told the business luncheon that up to 55 per cent of Chinese consumers remained unaware that the botulism scare had been a "false positive".

"We need to work on that, and that's what we're doing right now," he said. "We should not keep on going back to the [botulism] issue because that, we say in Dutch, is putting salt in wounds. We have to make sure that in the rebuild programme, in a subtle way, you're bringing the message across that there was nothing wrong."

Spierings said the 45 per cent of Chinese consumers that realised the contamination had been a false alarm respected the company's transparency around the scare.