Fonterra's botulism scandal 'gift' to China Govt

Jamil Anderlini says the 100% Pure campaign was explicitly singled out by news agency Xinhua. Photo / Chris Gormon

Fonterra's botulism scandal was one of the "greatest gifts" the company could have given to a Chinese Government that's focused on rebuilding its domestic dairy industry, according to a visiting foreign correspondent.

Jamil Anderlini, the Beijing bureau chief for London's Financial Times newspaper, was in Auckland this week for the China Business Summit.

In his address at the event, he pointed out the contamination scare began roughly a month after the Chinese Government launched an investigation into baby formula price fixing by foreign dairy companies in China, including Fonterra and French food giant Danone.

It also came just a few months after the new Chinese administration, which took power in March, announced a major strategy aimed at rebuilding and creating "national champions" in its domestic infant formula industry, which was decimated by the 2008 melamine scandal that killed six babies and sickened thousands more.

Following the scandal, sales of imported formula grew rapidly.

Small-scale Kiwi infant formula firms, whose exports to the Chinese market had soared in recent years, have been losing up to $2 million of weekly sales in China as a result of the Fonterra scare, according to the NZ Infant Formula Exporters Association.

"This was one of the greatest gifts that Fonterra could have given to the Chinese Government," said Kuwait-born Anderlini, who grew up in New Zealand but has been living in China for more than a decade.

He said at least 95 per cent of Chinese consumers had heard about the botulism contamination, but few were aware it had been a false alarm, as there had been very little media coverage of that development.

"This has been a disaster," Anderlini said. "The fact that it was a false alarm makes it even worse."

Speaking after the summit, he said New Zealand's 100% Pure tourism campaign had been "officially tarnished" by China's state-run news agency, Xinhua, which published an editorial that slammed the slogan as a "festering sore".

"The 100% Pure campaign was explicitly singled out by Xinhua," he said.

Anderlini said another major milk scandal, of similar magnitude to the 2008 melamine event, could potentially spark major social unrest and undermine the legitimacy of the Chinese Government.

Meanwhile, Danone has said the botulism scare will have a "significant impact" on its 2013 financial results, with full-year lost sales estimated at 350 million ($562.2 million) and lost margin estimated at 280 mil-lion.

The Paris-based company's infant formula products were recalled in eight countries including New Zealand and China.

The French company has said it wants full compensation from Fonterra for damages caused to its business during the botulism scare.