Fonterra report identifies 'shortcomings'

02:43, Oct 29 2013

Fonterra's "independent inquiry" into its botulism scare earlier this year has found shortcomings in a number of areas.

The inquiry's report, released this afternoon, has made 33 recommendations to improve and build on changes already underway to address the issues that led to the milk powder recall.

Click here to read the full press release on today's findings and the main recommendations (in PDF format).

In a press release, the inquiry found that a number of factors, including a lack of senior oversight of crucial decisions, problems with tracing potentially affected product and belated escalation of the issue, contributed to the event in August this year.
Speaking at the release of the inquiry report in Auckland today, Jack Hodder QC, who led the inquiry team, said the recall had let a high quality organisation down.
"There were shortcomings in a number of areas, which, compounded by a number of events and co-incidences, converged to create this significant issue.
"Our findings and recommendations do not indicate any fundamental problems within Fonterra. That is not our conclusion.
"They do point to a range of improvements Fonterra can make to become an even better company."

Among the inquiry's top five recommendations was one that said "the board should actively review ongoing progress towards shedding the adverse 'Fortress Fonterra' perception held by a material proportion of external stakeholders.

Another key finding was that Fonterra did not routinely use sulphite reducing clostridia tests on its whey protein concentrate, although it was contractually required to do so by at least one customer.

The review also found the test commissioned for botulsim were inadequate, as was its crisis management and external comunications.

"There was some lack of alignment and confidence between Fonterra and the New Zealand government in the critical fortnight after the contamniation concerns were advised to the government and made public," the report said.

Sir Ralph Norris, the chairman of the special oversight committee for the inquiry and an independent Fonterra director, said his committee "endorsed the key recommendations and themes identified by the inquiry team.
The inquiry team was led by a legal team from Chapman Tripp, co-ordinated by Hodder, and independent experts Gabrielle Trainor, a Sydney-based specialist in crisis management and communication, and international dairy consultant, Jacob Heida of the Netherlands.


The potential presence of botulism in some dairy products emerged in public on August 3, when Fonterra said there was a quality problem in three batches of whey protein concentrate made at its Hautapu plant in 2012.

Testing in March this year found the presence of clostridium bacteria in the batches and further testing in July indicated it could be the highly dangerous bolulism strain.

Although it proved a false alarm, the scare damaged confidence in New Zealand dairy products and could lead to costly litigation.

French company Danone, whose subsidiary makes infant formula using Fonterra ingredients, is reportedly considering a 200 million euro claim against Fonterra for lost sales.

This month Fonterra said it was in a dispute resolution process with Danone but denied legal liability for Danone's product recall.

Fonterra chairman, John Wilson, says that the board was fully committed to implementing the independent inquiry's recommendations.
"What directors found encouraging is that this independent report to the directors has a significant degree of overlap with management’s Operational Review, which was made public last month.

"There are no contradictions between the two sets of recommendations.
"Much of the recommended change is already underway, or has already been identified as needing to be changed.''

Fonterra's chief executive Theo Spierings said the report provided them with important in-depth observations and recommendations.
''The independent report findings and recommendations are consistent with our own approach to strengthening the co-operative and renewing trust and confidence among our many and varied stakeholders.

"For example, we have recently tightened our already rigorous food safety and quality controls.
''We have learned lessons from what has been a difficult experience, subsequently found to be a false alarm. We understand the anxiety caused at the time to our customers, regulators, shareholders and other stakeholders, both in New Zealand and around the world, and especially parents concerned for the welfare of their children."