The poisoned milk which contaminated infant formula produced by San Lu, in which Fonterra has a 43% stake is one of the reasons this season’s milk payout is lower than expected.
The $139 million loss is only money and to give the company some credit it made this clear when making the announcement today.
Fonterra chairman Henry van der Heyden said: “We are certainly not putting the financial consequences ahead of our primary priority of consumer safety. We are focusing all our efforts on what Fonterra can best do to work with the Chinese authorities and help get safe dairy products to Chinese consumers.”
The $139 million estimate is made up of the cost of recalling products plus Fonterra’s “anticipated loss of San Lu brand value”.
Mr Van der Heyden said: “At yesterday’s board meeting, the directors discussed the San Lu tragedy in depth and were fully supportive of the approach taken to date by Fonterra management and staff.
“Throughout this crisis, Fonterra’s paramount concern has been for the health and safety of Chinese consumers and recalling contaminated product as quickly and effectively as possible in the Chinese environment. The scale of this tragedy has been truly shocking and our heartfelt sympathies go out to all the affected children and their families.”
He described the latest revelations that San Lu management were investigating complaints of sick infants as early as eight months before the San Lu Board and Fonterra were first informed on August 2 as “deeply concerning”.
“That Fonterra was not informed earlier is frankly appalling,” he said.
It is, but Fonterra must also question its own actions and strategy in China.
The poisoned milk as an act of sabotage. But that should not have been unexpected and the company should have taken extra measures to safegaurd the production chain in light of recent quality problems with Chinese products.
Inquiring Mind has a list from the Financial Times of product recalls in China in the past two years which includes dumplings containing pesticide, toothpaste containing diethylene glycol, and pet food which poisoned animals.
Fonterra’s first priority now is to do what it can to help the victims of this tragedy.
It then owes it to its customers, its shareholders, its own and New Zealand’s reputation to ensure the very high standards it requires in the production and manufacture of its produce here are maintained in any ventures it undertakes elsewhere.
Other views on this issue: Inquiring Mind comments on a Wall Street Journal story; Poneke looks at international coverage; Macdoctor says it’s likely further deaths will be supressed; No Minister sees a political angle and Kiwi Polemicist gives some background information.