Fonterra fronts up over China milk scandal

01:43, Jan 31 2009
SOUR MILK: A child who suffered kidney stones after drinking contaminated Sanlu formula is treated in China. Fonterra conceded there are "management issues" with its Chinese joint venture partner.

Fonterra has conceded that there are "management issues" with its Chinese joint venture partner, SanLu, which is embroiled in a killer milk powder scandal.

The New Zealand dairy giant insisted yesterday that it tried to "do the right thing" despite SanLu knowing six months ago that babies were becoming sick as a result of drinking infant formula containing melamine - a chemical banned from food.

Fonterra, which owns 43 per cent of SanLu and has three directors on its board, also knew of the contamination for six weeks before a public recall, which began only after the New Zealand Government blew the whistle.

"You want the children to get better, you hope the children will get better ... You just pray that they get better," Fonterra chief executive Andrew Ferrier said. "This is an ethical issue of doing the right thing."

A third child died yesterday and the number of sick children grew fivefold to more than 6200. Chinese state-run media announced late yesterday that 21 more companies were found producing milk powder tainted with melamine.

Prime Minister Helen Clark said the Government alerted the Chinese Government as soon as it became aware of the contamination, which she said had been "covered up" by local authorities.


"We couldn't have it on our conscience that this was not being brought to the attention of the Chinese authorities in order for them to do something about it."

At a press conference in Auckland yesterday, Mr Ferrier said he was "absolutely demoralised" by the "tragic incident", but defended the decision to keep the scandal under wraps for six weeks.

Fonterra first learned of the problems on August 2, he said, and the company initially wanted to use influence and work inside the Chinese system to get the product recalled as fast as possible.

He was "hugely relieved" when, after six weeks, they secured a public recall.

Mr Ferrier defended the cooperative for not testing for melamine and said it was victim of a "criminal contaminant".

"So, yes, Fonterra missed testing for melamine; so did everybody else. That happens to food companies, it's a tragedy. If there was anything we could have done to prevent it, we wish as sure as hell we did."

Earlier, a Fonterra spokesman admitted the situation had raised "governance and management" issues.

Hebei provincial health authorities had done three separate tests, which all turned out negative for product-quality issues. "SanLu, as a precaution, decided to institute its own tests and in early August detected melamine in the product. They then informed the board and a trade recall was implemented."

All production at SanLu, the largest producer of infant milk powder in China, has been halted.

Fonterra may also be liable to refund customers and provide compensation. Under Chinese law, victims of unsafe products are allowed to sue the manufacturer or the retailer for compensation.

"We've got to find out how this works in the Chinese system and see how we can help," Mr Ferrier said.

Fonterra is voluntarily recalling a batch of its own branded prenatal milk, Anmum Materna, which was made under licence by SanLu.

 - The Dominion Post