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Fonterra to pay EUR105m to Danone over botulism scare

FBR Staff Writer Published 04 December 2017

Fonterra Co-operative Group has been ordered by an arbitration tribunal in Singapore to pay NZ$183m (€105m) to French food firm Danone over a product recall related to a false botulism scare.

In August 2013, the New Zealand-based dairy firm had issued a precautionary recall of a whey protein product WPC80 over the possible contamination with clostridium botulinum, a type of bacteria that causes botulism.

Danone, one of the customers of Fonterra which was supplied with WPC80, had to recall its infant-milk products made from the ingredient in China and several countries. However, the WPC80 recall from Fonterra turned out to be a false alarm with no food safety risk confirmed after testing of the samples.

However, the product recall dented the sales of Danone while forcing it to reduce its full-year targets.

“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.

“In April 2014, Fonterra had already been fined by judgement of the Wellington District Court for having breached several provisions of the New Zealand food safety regulations,” Danone said in a statement.

Fonterra defended itself by stating that its recall action in 2013 was based on technical information given by a third party which later turned out to be wrong.

The dairy co-operative said that while there was never any risk to consumers with the product, it had gone on to improve its escalation, product traceability and recall processes, and incident management systems ever since the 2013 episode.

Fonterra’s 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 co-operative further said that it will closely study the tribunal’s findings although it has recognised that there are limited options for it in appealing against the judgment of an international arbitration.

Image: Exterior view of the Danone Unimilk factory of Chekhov, Russia. Photo: courtesy of Danone.