Fonterra 'silo' culture slammed in government botulism probe

Danone's subsidiary Nutricia recalled 67,000 cans of its Karicare formula as a result of the 2013 botulism scare. Photo / Bevan Conley

A Government inquiry into the Fonterra whey protein scare said the dairy giant's workplace culture showed an entrenched "silo" mentality that robbed the company of some of the cohesion vital in an organisation of its size.

The report covering the 2013 "WPC80" whey protein incident, which prompted a widespread precautionary product recall when initial tests - which later turned out to be false - showed the product may have contained a botulism-causing bacteria - C. botulinum.

• Danone says court delay would cause injustice if Fonterra arbitration fails
• Danone: We're still hurting after big recall

"Both internal and external pressures also contributed to missed opportunities to correct the course of events," the report said.

Communication, both within and between parts of the organisation, was often unclear, it said.

"And there was also a lack of adequate escalation procedures to deal with possible food safety problems," it said.

"The ill-prepared inevitably pay a heavy price in a crisis. Fonterra was not ready for a crisis of this magnitude.

"It lacked an updated, well-rehearsed crisis plan to implement, as well as a crisis management team that could spring into action," it said.

The report said the Ministry for Primary Industries also lacked a single, coherent food incident plan to implement straight away.

The inquiry, which was headed by Miriam Dean QC, said the WPC80 incident had spurred Fonterra into a series of comprehensive changes, from boardroom to factory floor, especially aimed at strengthening food safety and quality and crisis management capability.

It had also prompted changes at the MPI, which had created a regulation and assurance branch devoted more or less solely to food safety.

"The ministry is also preparing a new crisis response model for implementation in 2015," it said.

The government today announced $7.9 million of funding for the ministry over four years to address the inquiry's nine primary recommendations. They include revised rules for non-routine 'reworking' of food products, completion of a food incident protocol, regular exercises and simulations of food safety incidents, re-establishing a group of scientific experts similar to the disbanded NZFSA Academy, new statutory powers so the ministry can extract information from affected companies,

The inquiry also says the ministry should have enough targeted funding to complete "much-needed" reform of dairy regulations and has resources over and above what it needs for day-to-day operations to ensure a regular programme of simulations. It also wants a law change to clearly define what tests must be conducted by laboratories and a register of laboratories around the world.

In the report's peer review, Professor Alan Reilly, chief executive of the Food Safety Authority of Ireland, says a sobering inquiry finding is "the sad reflection that this incident with its serious consequences was entirely avoidable, had a strong food safety culture thrived in the workplace."

"As the Inquiry noted, by reworking, rather than downgrading, the contaminated WPC80, Fonterra recovered about $150,000. The cost to the company and the reputational damage for New Zealand magnified this figure many times over," Reilly said in his review.

The inquiry found that by the time of the incident, Fonterra had done little "beyond the formal establishment of systems and processes to foster such a food safety culture."

"Fonterra also acknowledges this," it said. "It recognises that its board and senior management could have done more to elevate the profile and priority of food safety. The question is whether the inquiry can be satisfied that, as a result of the incident, Fonterra is now committed to a stronger culture of food safety and quality. From changes already under way and the determination with which Fonterra is implementing them, the answer is yes."

- with BusinessDesk

Read the full report here: