Fonterra halts Sri Lanka operations after protests

Theo Spierings. Photo / Richard Robinson

New Zealand dairy giant Fonterra today told its 755 employees in Sri Lanka to go home as a security measure after protests over food safety took place outside its office near Colombo.

Media reports from Sri Lanka, where Fonterra employs mostly Sri Lankan nationals and six New Zealanders, said a government-allied group protested outside the office demanding that the company respect a court order and withdraw what it said was contaminated milk products from the market.

The Sri Lankan government wants to increase domestic dairy production and reduce the country's reliance on dairy imports.

Farmers, many of whom own dairy cows, are President Mahinda Rajapaksa's main voter base, international news agency Reuters reported.

The agency said more than 100 members of the National Freedom Front, a nationalist political party in Rajapaksa's ruling coalition, had protested at Fonterra Brand Lanka's head office, 30km north of Colombo.

Fonterra and Sri Lankan authorities have been engaged in a war of words over the last few weeks over the safety of some of the cooperative's products.

Earlier this week, Fonterra said it had received notification of a temporary injunction to prevent it selling its products in Sri Lanka.

The cooperative has refuted allegations that its products contained agricultural chemical dicyandiamide, or DCD. The whey protein concentrate products that were the subject of a product recall earlier this month had not been sent to Sri Lanka.

In today's statement, chief executive Theo Spierings said Fonterra had suspended its operations in Sri Lanka as a precautionary measure because the situation there had become "unstable".

He said in a statement that Fonterra had two priorities, protecting its people and protecting its farmer shareholders' assets.

"The temporary suspension is the right thing to do," he said in a statement. "It is a precautionary measure to ensure our 755 people working there are safe," he said. "We have closed our plants and office in Sri Lanka, and have asked our people to stay at home."

In today's statement, Spierings said Fonterra had provided assurances to the Sri Lankan authorities about the safety and quality of Fonterra's products.

"Recent events, however, have made it difficult to maintain day-to-day operations, and we need to get them resolved," he said.

Fonterra is the subject of an "enjoining order" which has shut down its ability to sell product, advertise it or make public statements in any way with customers or consumers in Sri Lanka.

"We are also working with Sri Lankan and New Zealand government authorities on a long-term sustainable solution for our Sri Lankan customers, communities and dairy sector," he said.

New Zealand has had a presence in the Sri Lankan dairy market for 35 years and is a significant player in the local market, taking supplies from 4000 local farmers.

Economic Development Minister Steven Joyce declined to be drawn on whether the protests were politically motivated, but said there had been discussion in Sri Lanka about the development of its dairy industry.

"Obviously there are serious issues that need to be worked through with the Sri Lankan government and we are helping with that," Joyce told reporters at Parliament.

The country buys about $260 million, or 2 per cent of New Zealand's dairy exports, a year.