Fonterra has been ordered to pay €105 million in damages to Danone as a result of a product recall linked to a false botulism scare.
In 2013 Fonterra quarantined what it thought was infected supplies of whey protein over fears it was contaminated with clostridium bacteria. This led Danone to recall infant milk products in eight countries. The scare was later declared a false alarm.
Danone launched legal proceedings in New Zealand and Singapore, with the results of the Singapore case released today. The French company said it welcomed the decision ‘as a guarantee that the lessons from the crisis will not be forgotten’.
Fonterra said it has assessed the potential financial implications of the decision and has consequently revised its forecast earnings per share range for the 2017/18 financial year to 35 to 45 New Zealand cents, down from 45 to 55 New Zealand cents.
Reacting to today’s announcement, Fonterra CEO Theo Spierings said: “We are disappointed that the arbitration tribunal did not fully recognise the terms of our supply agreement with Danone, including the agreed limitations of liability, which was the basis on which we had agreed to do business.
“The decision to invoke a precautionary recall was based on technical information obtained from a third party, which later turned out to be incorrect.
“While there was never any risk to the public, we have learned from this experience and as a result have made improvements to our escalation, product traceability and recall processes, and incident management systems.
“We operate in a fast-changing and complex industry, and will always prioritise food safety and quality in our commitment to be the world’s most trusted source of dairy nutrition.”
In a statement, Danone said: “Danone considers that this arbitration underscores the merit of its legal actions against Fonterra, including to champion the highest standards of food safety across the industry.”
It added: “Danone believes that food companies and their suppliers can only work together through a solid relationship based on trust, transparency and accountability. Danone will continue to build that relationship with its suppliers across the world.”
© FoodBev Media Ltd 2019