Fonterra Cooperative Group wants more information from its Chinese partner Beingmate Baby & Child Food amid reports the infant formula firm didn't make sure product sourced from another supplier met its licensing conditions.
The Spinoff website reported Beingmate was among several infant formula firms found to have breached manufacturing rules, saying a DHA algae oil powder was inconsistent with its licence. A Fonterra spokesman said the Kiwi dairy company was seeking more information, but that it appeared to be a procedural issue over the licences held by other suppliers and that the local Chinese authorities had accepted Beingmate's steps to address the problem.
He stressed that the problem wasn't related to any Fonterra product, and said the New Zealand company is trying to better understand what the remedial steps are.
Fonterra owns an 18.8 percent stake in Beingmate which it bought in 2015 for about $755 million as part of its plan to break into China's second- and third-tier cities, where the Kiwi company had limited exposure. The investment hasn't panned out as well as expected, with Beingmate reporting losses and Fonterra wrote down the stake by $405 million in the first half of the current financial year, calling the performance "unacceptable".
Beingmate was supposed to be the turning point for Fonterra's Chinese plans, which have included developing farming hubs in the world's most populous nation, rebuilding its brand after the 2013 whey protein concentrate food scare and the 2008 melamine scandal, where its then-partner San-Lu added the chemical to milk products to artificially improve their protein levels, killing six infants and hospitalising more than 800.
Fonterra Shareholders Fund units rose 0.8 percent to $5.05 today.