Dairy giant's brand is in trouble after botulism scare despite company's long relationship with its image handler.

Public relations sharks are circling Fonterra and what is believed to be New Zealand's biggest image handling contract.

But can they undermine the close, long-term relationship between the dairy co-op and Baldwin Boyle Group (BBG), following the baby milk powder botulism crisis? The job of a public relations firm is to defend their client's brand, and as politicians have made clear, this brand is in trouble.

Former chairman Sir Henry van der Heyden - who headed the board at the end of the year when it negotiated a five-year extension of the seven-year relationship - is standing by the PR company.

Public relations insiders say van der Heyden has been a rock supporting BBG and its place at the firm. Asked about the relationship with BBG, he told the Herald: "If you are trying to demonstrate that I have had a long association with BBG, I'm happy to confirm that. But it has been a professional relationship ...


"In my opinion they are a very capable and professional group of people and I'd be happy to recommend them to anyone."

A consultancy takes orders from its clients. There is no evidence that the public relations firm is responsible for the confusion and seemingly haphazard communications as the crisis unfurled.

The problems have had to be handled by Fonterra's new communications boss, Kerry Underhill.

That appointment on August 1 ended a period when BBG or former BBG directors dealt directly with the chief executive.

Underhill's appointment was seen as a sign that top management wanted to take more direct control of its PR after a long period where the function was outsourced, initially by BBG reporting to the chief executive, then through a former BBG director, Louise Nicholson. Baldwin Boyle maintained a strong relationship with the Fonterra board and at one point BBG director Brenda Baldwin was a board member.

Public relations sources said the long relationship between Fonterra and BBG was largely due to the strong rapport between van der Heyden and Brenda Baldwin.


Underhill returned to New Zealand after 30 years in February to oversee the Fonterra corporate brand after working at big corporates such as Deutsche Bank and UBS in Europe.


Fonterra has been the subject of numerous attacks and criticism, including some from the Government, and its communications have been criticised as confused.

But Underhill believes Fonterra has done well in the situation and from his experience, corporates in its situation would likely not have been as open and accessible as Fonterra had been. He said media coverage in China and elsewhere had been balanced.

He understood why New Zealand media had reacted as they did.

"We had a TVNZ reporter the other night who talked about the hysteria, but he was being quite hysterical himself," Underhill said.

There were several aspects to the way communications unfolded and Fonterra will be shown to have handled it well in internal investigations over the next two months. Other issues included:

Some problems related to complexity about whether Fonterra - which supplied the problematic raw product - could comment on recalls of retail product, rather than the client firms involved.


The reference to a "dirty pipe" as responsible for the problems was a colloquial engineers' expression and created the wrong impression.

Fonterra was limited in talking about recalls when this was the responsibility of clients.

The involvement of regulators, such as the Ministry for Primary Industries in New Zealand and those in China, was also beyond its control.

Underhill insisted Fonterra had acted swiftly to notify the public with a press statement on Friday night.

But much of the criticism and accusations about communications has been about why it did not take action when the issue was first identified back in March. "I'm not trying to spin. But the product in March met all specs for customers - it was all certified acceptable - it was just about elevated levels - it was not an alarm in March.

"This is a question people will ask, if you have an elevated level at what point do you block or hold. That is obviously going to be discussed when we are looking at it internally."



Fairfax has moved the sub-editing for more publications to "hubs" in New Zealand, with the loss of 25 jobs in Brisbane. Subs have the job of checking and editing copy to ensure it is correct, as well as writing headlines.

But the firm - which publishes the Sunday Star-Times, Waikato Times and Dominion Post among other Kiwi newspapers - does not plan to hire more staff here to do the extra work. Presumably, existing staff will just have to work a little harder.

The Australian newspaper - owned by Fairfax's Australian rival News Ltd - said on Wednesday that the move of more subbing to New Zealand followed the end of a Fairfax agreement with its subbing contractor, Pagemasters.

As a result 25 jobs have been lost from Pagemasters' Brisbane operation.

The work is now to be handled at editorial "hubs" which work on Fairfax papers here and in Australia.


The hubs were regarded as a cheaper option than entering into a new agreement with Pagemasters or employing local subeditors, the Australian said. Popular sections of the Age and Sydney Morning Herald such as Good Living, Epicure and Metro will now be subedited in New Zealand.

Fairfax's Illawarra Mercury, Newcastle Herald and seven associated community papers have already moved subbing to New Zealand, as has the Australian Financial Review.

From a New Zealand perspective, the shift of work could be regarded a good thing, as it increases the amount of work for journalists being conducted here.

Fairfax has been implementing a wide and ongoing programme of restructuring and cost-cutting to deal with the problems in publishing.

The company appears to be confident its latest restructuring, creating hubs, has provided a big increase in efficiency.



The closure of TVNZ's U channel at the end of the month has big implications for Freeview on the eve of the Government completing the switchover to digital television. At the end of this month U will be replaced by a channel running TV2 programmes one hour after they show on the main channel. It is the third Freeview channel TVNZ has closed.

TVNZ chief executive Kevin Kenrick said advertising-funded channels had to have mass appeal. He saw niche channels as having a home with on-demand services, which allow people to watch content via the internet. One, 2, TV3, Four and Prime already appealed to a mass market in a small country with just 4.5 million people, Kenrick said.

"Sky TV chief executive John Fellet says that Prime TV is a break-even proposition," Kenrick said.

"And [TV3 and Four owner] MediaWorks is in receivership, so it's not surprising a channel the size of U is not going to be financially viable," he said.

"Niche channels reliant on ads will always be a challenge in a market of 4.5 million."