Fonterra cuts blamed on botulism scare
Falling demand for Fonterra products after food scares forced the dairy co-op to axe about 110 jobs at a Hamilton packing site, a union official says.
The Dairy Workers Union official told Fairfax Media Fonterra was slashing the jobs at Canpac, in Foreman Rd, by about a third after last year's botulism scare.
The dairy co-operative called a snap meeting of all Canpac staff this morning to tell them it was cutting back the operation to a 24-hour day, five days a week after a drop in sales volume on products packaged there.
It had been a 24 hours, seven days a week operation since expanding in 2007 on the back of the commodities boom.
Dairy Workers Union national secretary Chris Flatt said a Fonterra presentation had admitted food-safety scares played a part in Canpac losing work.
"The presentation was very clear in terms of the volume drop-off, the implications that have come out of the WPC80 – the botulism scare – as well as China's change to certification rules," Flatt said.
"It's had an impact on the business, and we understand that."
However, Fonterra director of operations Rob Spurway denied the botulism scare had anything to do with today's announcement.
"I don't think so," he said after the presentation to staff.
"We've seen quite strong commitments from our customers.
"The major change really is about changing back to aligning back to a 24/5 operation, it's about simplifying the way we operate Canpac and making it a more efficient, cost-effective operation."
Fonterra was hit by a food safety scare last year after recalling 38 tonnes of whey protein concentrate WPC80 on the suspicion it was tainted with lethal botulism.
In 2012 traces of the chemical DCD were found in Fonterra milk, resulting in a Sri Lankan court banning all Fonterra products from being sold or advertised in that country.
That came on the back of a scare in 2008 when Chinese company Sanlu, 43 per cent owned by Fonterra at the time, recalled 10,000 tonnes of infant milk formula after it was found to have contained poisonous melamine.
A total of 3000 Chinese infants were thought to be affected, and six died.
Flatt said the union was "well aware" Canpac had been struggling with volumes for the past year.
That had been compounded by Chinese and European competitors setting up shop in New Zealand, where they could control their supply chain.
"There are a number of new producers coming into the New Zealand environment as well," Spurway said. "We've got Chinese firms setting up, we've got large European firms setting up."
He was unconcerned about cuts further damaging Fonterra's reputation.
"Like any industry dairy is a volatile business; demand can go up and it can go down.
"We are always faced with challenges from overseas competitors as well as changes to the rules as we've seen with China's new certification processes so it is challenging times."
The union has 260 members at Canpac, of which about 80 may lose their jobs.
Fonterra employs 330 workers at the Canpac site in Te Rapa. Its website still says 450 employees are at the factory.
Workers left the hour-long meeting hugging each other. Most refused to speak to the media. Spurway denied Fairfax Media access to staff, but one man ignored him.
"Look, I can't talk, or I can kiss my job goodbye. They told us we can't speak to media, something about a confidentiality agreement," the worker said.
Fonterra workers sign confidentiality agreements with the co-op as part of their contracts.
Fonterra employs about 2000 people in the Waikato and invested more than $150 million in the region over three years.
"We are continuing looking at where we can further invest in the Waikato, but have to make decisions based on what aligns with Fonterra's strategy and will drive the greatest returns to our farmer-shareholders," Spurway said.
Spurway said the co-op was continuing to look at where it could invest in the Waikato, but would have to make decisions that were aligned with Fonterra's strategy and "will drive the greatest returns to our farmer-shareholders".
"We have invested heavily in our foodservice business, spending $120m on a new UHT plant at our Waitoa site and $30 million on a cream cheese plant at Te Rapa, which combined have created 90 permanent jobs, on top of the hundreds involved in the construction," he said.
"We have also recently lodged consents to build a new milk powder drier at Lichfield and if this expansion goes ahead it would mean another 50 processing jobs."
Canpac is Fonterra's second-largest packaging site in New Zealand, with capacity for 24 production lines to pump out more than 300 different products. Most are exported to China and the greater Asian region, with about 14 per cent of products distributed locally, 8 per cent exported to the Americas, and 2 per cent to Japan.
The company has won multiple print awards for its packaging, including the Pride in Print Supreme Award in 2010.
Baldwin Boyle Group consultant Anika Forsman, whose company has the Fonterra public relations contract, told Fairfax Media the job losses were restricted to the Canpac site.