Formed in 2001 to represent most New Zealand dairy farmers, Fonterra is the world’s biggest dairy exporter. It suffered a setback in China in 2008 after an adulterated milk powder scandal affecting Sanlu, 43-per-cent-owned by Fonterra. The milk powder was adulterated with melamine, affecting thousands of Chinese infants and killing six. Sanlu was declared bankrupt and several managers were sentenced to prison. In 2013, Fonterra also sought to reassure the market after Dicyandiamide, also known as DCD, was found in exported New Zealand milk. DCD is used to stop nitrogen leaching on farms. In August 2013, some of its products were withdrawn in selected Asian countries including China after it said it had found bacteria which can cause botulism in some of its dairy products.
Fonterra and New Zealand applauded for transparency
Press commend company for warning customers of whey powder safety fears - and say it's a lesson for domestic producers
The surprising twist that a batch of whey powder exported to China by dairy giant Fonterra's did not contain botulism-causing bacteria after all might have incurred losses for the company in the short term, but its handling of the incident has earned it and the New Zealand government great admiration on the mainland.
Only weeks ago headlines in mainland media screamed how the Fonterra safety scare demonstrated that foreign dairy products did not necessarily guarantee safety and quality. But now they applaud the company for being responsible and voluntarily warning customers of the possible safety threat.
Mainland media also point to the case as an object lesson for domestic dairy producers on how to protect their reputation, and market share as a result, by putting ethics above all.
New Zealand's Ministry for Primary Industries said on Wednesday tests showed that whey protein concentrate manufactured by Fonterra contained Clostridium sporogenes, which cannot cause botulism, but which at elevated levels can be associated with food spoilage.
Original tests conducted by Fonterra and a New Zealand government research institute had indicated the presence of C. botulinum, raising fears that infant formula and sports drinks made from the product was potentially dangerous.
"Let's put aside the details of why the company could not tell the difference between the two bacteria, but Fonterra's extreme caution about quality - like the old Chinese saying that every bush and tree looks like an enemy - is worth learning from. It's commendable that the company voluntarily reported to the government and started the precautionary recall," the Chutian Metropolis Daily said in a commentary.
An editorial in the Nanfang Daily said Fonterra's economic losses would be overshadowed by new profits after rebuilding its goodwill. "It is admirable that Fonterra and the New Zealand government were transparent and issued a warning… The market will surely provide an answer on whether such moves boost consumers' confidence or not," the newspaper wrote.
The Chutian Metropolis Daily said how the company handled the situation was in stark contrast to scandals at domestic baby formula companies. After quality problems were exposed by the media or government inspections, companies implicated would at first deny the charges before employing public relations experts to cover them up.
"What a painful lesson it is to see the once famous Sanlu baby formula disappear from the market. People can only sigh at the difference of how they handled a crisis," lamented the newspaper.
Sanlu Dairy was once a major domestic dairy firm based in Shijiazhuang, but its melamine-contaminated baby formula were the source of the country's most serious food safety scandal in 2008, involving the deaths of six infants and causing kidney disease in 300,000 other children. Dairy producers often lacked proper feed for their herds and added melamine to boost protein levels in their milk.
It was later discovered that the company had asked the local government months before to help "manage" negative news reports that melamine in its milk powder had made infants ill, even though an internal investigation by the company faulted the melamine-adulterated milk.
The Chongqing Economic Times blamed domestic dairy companies who lacked a sense of responsibility for their own plight, adding that if they treasured their reputations like Fonterra had they would take proper steps to ensure their product quality.
On the other hand, the newspaper argued, that the punishment for such infringement by domestic dairy companies was not a sufficient deterrent, whereas manufacturers or test centres in New Zealand could lose their licences for failing to inform the government in time.