Fonterra Cooperative Group is satisfied Beingmate Baby & Child Food is taking the right steps to deal with a labelling issue after getting caught out in a widespread audit by Chinese regulatory authorities.
The world's biggest dairy exporter sought details from Beingmate after it was among a number of infant formula firms found to have breached its licensing conditions.
The issue was how Beingmate labelled its DHA algae oil powder ingredient standard, which Chinese authorities said differed from Beingmate's own documentation.
A Fonterra spokesman stressed the issue wasn't a food safety problem, and that the cooperative was satisfied with Beingmate's steps to fix the problem, which had been accepted by Chinese regulators the same day the notice was issued. No Fonterra product had been mislabelled, he said.
"The audits carried out by the FDA are regular and mandatory for all infant formula manufacturers in China, including Beingmate, with approximately 100 audits already completed," the spokesman said in an emailed statement.
"The FDA publicly stated that no unsafe product was found in the National Supervision Program and all necessary corrective action was taken by Beingmate."
Chinese authorities have been taking a hard line over food safety since the 2008 melamine scandal, when Fonterra's then-partner San-Lu added the chemical to artificially bolster protein levels in milk products, inadvertently killing six infants and hospitalising more than 800 others.
In the intervening decade, China has placed food safety under close scrutiny, including tighter registration requirements for imports after the explosion of sales through unofficial online channels known as the 'daigou' market.
Fonterra owns an 18.8 per cent 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 $405m 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.
Fonterra Shareholders Fund units rose 0.6 per cent to $5.08 today, having dropped 21 per cent so far this year.