Fonterra swings axe: first scares, now tears

Falling demand for Fonterra products in the wake of food scares has forced the dairy co-operative to axe around 110 jobs at a Hamilton packing site.

The 330 workers at Fonterra's Canpac site were called to an emergency meeting yesterday morning and told their numbers would be slashed by a third.

The cuts came on the back of falling volumes in the wake of last year's botulism scare, the co-op later confirmed.

It said French food giant Danone was one of the major customers to pull out of contracts at Canpac, which "played a role" in yesterday's cuts.

Danone has a half-billion dollar High Court battle with Fonterra on hold. It claims it lost that amount recalling products involved in the botulism scare.

Former Hamilton mayor and Fonterra shareholder Russ Rimmington said the chickens had come home to roost for the co-operative.

"They can't get the basics right. Through their [Fonterra's] incompetence, it has started to affect in a hugely detrimental way, the Fonterra brand and the New Zealand Inc brand."

Fonterra has had "three strikes" he said; Sanlu, the botulism scare and the fresh cream recall. "It can't continue. It has affected Fonterra and they have really stuffed up."

Fonterra's top management and board needed to be held to account as yesterday's announcement would have a flow-on effect beyond the 110 job losses into the community, he said.

However, Fonterra director of operations, Rob Spurway, said Canpac had been under pressure since 2009 when about 450 people worked there.

The co-op had been letting numbers drop through natural attrition or secondments to other plants since then. But even the drop of 120 employees over the past five years hadn't been enough to stem the tide of lost work.

Cheaper production offshore, and the cost of commodities, had seen demand for Canpac products drop off.

Competition from other producers was also having an effect, according to Dairy Workers' Union national secretary Chris Flatt.

Infant formula producer Yashili is months off finishing a $220 million plant in Pokeno. Its 120 jobs will become available just as the Canpac workers finish.

Dutch dairy company Royal FrieslandCampina has bought a 10 per cent share in the South Island's Synlait, a Fonterra competitor.

Danone has also made moves to purchase its own farms in New Zealand since the botulism scare.

Flatt said the announcement at Canpac yesterday was likely "a result of some of that" competition.

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. It later proved to be a false alarm.

In 2012 traces of the chemical DCD were found in Fonterra milk, resulting in the Sri Lankan court banning all Fonterra products from being sold or advertised in the country.

In 2008 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 melamine. Three thousand Chinese infants were thought to be affected, and six died.

Fonterra yesterday denied Fairfax Media access to staff, who were given the day off after the announcement.

Workers told the Waikato Times that they had been ordered not to talk to the media.

Fonterra confirmed Canpac primarily exports to China and greater Asia, and also manufactures products for New Zealand, Australia, the Pacific, the Americas, and Japan.

Fonterra employs about 2000 people in the Waikato and invested more than $150 million in the region over three years.

Waikato Times