Keeping it in perspective

A lot of the media have been referring to the contaminated whey scandal.

On Monday’s Farming Show, Jim Hopkins pointed out that it was a scare not a scandal and Macdoctor adds some more perspective to the issue:

With everyone all abuzz about the latest Fonterra debacle, the MacDoctor thought it may be helpful to inject a little perspective into the situation by comparing it with the SanLu scandal.

	SanLu	Fonterra
Contaminant:	Melamine	C. Botulinus
Introduced by:	Deliberate, For profit	Accidental
Discovered by:	Investigation after death of children	Routine Investigation
Time taken to public announcement:	5 weeks from confirmation	3 days from confirmation
Number injured	300 000	0
Number hospitalised	54 000	0

Last night’s media release makes the contrast even greater – there was almost no time wasted in making a public announcement.

Contrary to earlier reports, Fonterra didn’t confirm tests until Friday and immediately notified the Ministry of Primary Industries and the public notices followed within hours.

That the company’s inept public relations was responsible for earlier information doesn’t reflect well on it.

Thankfully its food safety standards are considerably better than its initial communication led us to fear.

And for a completely different perspective The Civilian says Chinese media says problem with New Zealand economy is that New Zealand isn’t a ruthless dictatorship:

Chinese media have lashed out at New Zealand this week following the potential contamination of thousands of tins of baby formula by dairy giant Fonterra, saying that it was only able to happen because the country’s economy was not governed by a ruthless authoritarian state willing to terrify its citizens and companies into compliance.

Writing in the China Daily, columnist Huan Bai blamed the recent contamination scare on New Zealand’s “individualist philosophy” which “puts emphasis on personal freedoms ahead of efficiency,” and a laissez-faire economic system that allowed human beings to make choices for themselves, pursue their dreams and be content in their own fallibility without living in continual fear of execution if something goes wrong. . .

Not another Chinese milk scandal

When I heard the news yesterday that hormones in milk might be behind the early sexual development of Chinese girls I feared the worst.

This was going to be a repeat of the Sanlu melamine poisoning scandal and once more Fonterra was implicated.

The company was quick to say:

Fonterra is a supplier of milk powder to Synutra International but we understand Synutra sources some milk locally and imports whey powder from Europe.

In New Zealand there are strict legislative controls on the use of Hormonal Growth Promotants (HGPs) – they are not allowed to be used on milking cows.

The strict controls mean that it is not necessary for New Zealand milk or milk products to be routinely tested.

Fonterra remains 100% confident about the quality of its products.

Thankfully our reputation for high standards of food safety mean when Fonterra says this.

Thankfully too,  Dunedin School of Medicine’s head of paediatrics Professor Barry Taylor says it’s unlikely milk powder is the cause.

“If there were three cases here in Otago I probably would not jump up and down. And certainly not if there were three cases in several many millions of people. There would be a natural number occurring, and I suspect, [if milk powder was the cause] there would be somewhat more than three,” Taylor told ONE News.

But false alarm or not, it is another reminder that the standards we adhere to in New Zealand are not those in all other countries.

Where Fonterra would almost certainly believed, the story of the cover-ups in the Sanlu scandal  show that it would be difficult to put the same level of trust in Chinese companies.

Adolf at No Minsiter says this is the reason we should prevent Chinese interests from buying up large chunks of our dairy industry.

I wouldn’t go that far but I do think it is essential that the integrity of our food production and processing is safeguarded whether it is foreign companies operating here or ours operating in other countries.

We can’t compete on price with countries like Brazil but we can compete on quality. Food safety is an important ingredient in our reputation for quality and we can not afford to have it compromised by people who don’t share our standards.

On-line reselling has dangers for buyers and producers

The Food Safety Authority is invetigating claims that Chinese people are buying large amounts of New Zealand infant  milk powder here to sell on-line in their home country.

It’s understandable that parents in China don’t trust their own milk powder in the wake of the Sanlu melamine poisoning, but buying on-line has risks too.

Producers are concerned that their product may be sold in a damaged state which may compromise the safety of the product and reflect badly on them.

Another concern is that the contents of the tins may not even be New Zealand milk powder.

Immense damage could be done to New Zealand’s reputation for safe food products if their were problems with the standard of something purporting to be our produce.

It is difficult to police internet sales and the buyer should always beware. But there is little a company can do to stop people buying their produce and selling it on-line in other countries, or using their containers to sell an inferior substitute.

Melamine scandal gets murkier for Fonterra

Tian Wenhua the former chairwoman of Sanlu who was convicted for her part in the melamine milk poisoning scandal said she acted on advice given by a Fonterra board member.

But Fonterra’s chief executive Andrew Ferrier says the company was always clear there was no safe level of melamine in milk.

China’s state news agency, Xinhua,  . . .  said rather than stopping production of tainted products after the contamination was confirmed on August 1 last year, Sanlu decided to limit melamine levels to within 10mg for every kilogram of milk.

“Tian said during her trial that she made the decision not to halt production of the tainted products because a board member, designated by New Zealand dairy product giant Fonterra that partly owned Sanlu Group, presented her a document saying a maximum of 20mg of melamine was allowed in every kg of milk in the European Union,” Xinhua said. “She said she had trusted the document at that time.”

Mr Ferrier told the Herald a Fonterra representative had given Tian the document soon after the board was advised of the contamination on August 2.

“The context was when this whole thing broke there was an enormous amount of work going on to find out what melamine was and there was research all over the world about its contaminants, its danger,” Mr Ferrier said. “There was information pulled up from Europe, from the US, everywhere.”

. . . Mr Ferrier said: “I do want to be crystal, crystal clear – although there was lots of information that was pulled up we were vividly clear to Sanlu that the only acceptable level [of melamine] was zero.”

At no point did Fonterra tell Sanlu it was acceptable to keep producing to the melamine level in the report, he said. “Absolutely not, absolutely not.”

I believe Ferrier but it’s not me he needs to convince, it’s consumers who rely on the company’s commitment to the highest possible safety standards for its products.

Just a few months ago Fonterra was being held up as the model to which other processors of primary products should aspire. The fall in world commodity prices is  a large part of the reason this has changed and the company can’t be held responsible for that. But another reason is that it has not handled the melamine scandal well.

As Keeping Stock says:

. . . Fonterra still has a lot of questions to answer, and there’s no escaping the perception, whether merited or not, that Fonerra has been less than transparent throughout.

Fonterra has appeared to be on the backfoot throughout  the whole sorry saga and Roarprawn  is right when she says the company needs a rocket.

Paul Henry discussed the issue with Fran O’Sullivan on Breakfast yesterday and she said that the company made a fundamental mistake at the start by thinking the scandal could be isolated as a Chinese problem. She also said that journalists have been unimpressed by the slow response from the company.

A large company ought to understand the importance of not just being on top of such a potentially damaging issue but showing the world it is on top of it. Regardless of how well the Fonterra may be handling things behind the scenes its poor public relations are giving the impression it’s not handling things well at all and allowing questions over its involvement in the melamine scandal to fester.

What has Fonterra learned?

What would Fonterra have done differently before investing in China if the company could have foreseen the melamine poisoning which killed at least six babies, poisoned tens of thousands of others and has led to the chair of Sanlu, Tian Wenhua,  being sentenced to life imprisonment  and two men who supplied melamine being sentenced to death?

The answer to that hypothetical question probably doesn’t matter.

But what Fonterra has learned from the experience does matter  if the company has any thoughts of investing in China in the future.

It’s a vast country with a very large population which means there are big opportunities for investment, but the Sanlu experience shows there are also huge risks.

White gold tarnished

At the start of last year sheep and beef farmers looked enviously at the returns dairy farmers were enjoying and aimed to get prices for meat, wool and other by-products which matched those from milk.

The gap between sheep and beef returns is closing on those from dairying but that owes more to the fall in the price of milk than improved prices from cattle and sheep.

Fonterra has already announced a drop from its opening forecast of $6.60 a kilo of milk solids for the season to $6 and is expected to announce a further fall at the end of the month.

The average price the company got at its internet auction  on Tuesday was $US2017 ($NZ3420) per tonne which was 9.3% less than the average in December.

The only glimmer of hope is a small rise in spot prices which might indicate prices are reaching the bottom of the cycle but that’s small comfort when the global price for milk, which peaked at the end of 2007, has fallen sharply  since September last year. 

The state of global commodity markets isn’t the only problem facing Fonterra which just 12 months ago was being held up as the example the sheep industry should follow as the benefits from the white gold flowed through rural communities and into the wider economy.

The on-going fallout from its investment in Sanlu, one of the company’s hardest hit by China’s poisoned milk scandal continues. Sanlu was declared bankrupt  by a Chinese court on December 24th and the way the company has handled the issue doesn’t give me any confidence that it has learnt enough to ensure success in any future investment in China.

However, the financial losses from the Sanlu investment have already been taken into account and disappointing as Fonterra’s payout is expected to be it’s unlikely to fall as far as that of Westland Dairy Co-operative. It’s  reduced its forecast payout   for the season from the $5.20 to $5.60 a kilo of milk solids announced in November to $4.10 to $4.50.

Making matters worse is Westland’s decision to backdate the forecast meaning suppliers have to pay back money already received.

The reduced payout will mean suppliers will receive $180 million less than expected.

To bring that down to an individual farm: the owner of a 350-cow herd received $90,000 for his milk from Westland last month and had budgeted on getting $120,000 for January but is now expecting just $30,000.

Lincoln University professor Keith Woodford  said that given Westland’s position that Fonterra is unlikely to to achieve a payout of more than $5.

Westpac economist Doug Steel has a more positve view and thinks Fonterra could still achieve a $6 payout.

However, the company could do well to follow the advice given to politicians to under promise and over deliver because a lower forecast might help to stabilise or even reduce some of the production costs which rose further and faster than last season’s record payout.

The whitegold has tarnished but most commentators are still confident that the longterm outlook for dairying is positive for those who are able to farm there way through the current lower returns.

Established farmers with good equity will be disappointed by the drop in income and may have to tighten their belts but it shouldn’t threaten their businesses and they’ll be helped by the fall in interest rates and the cost of fertiliser and fuel.

Those most at risk are the ones who have just converted or are in the process of converting for next season who bought land and stock at peak prices; and sharemilkers who bought cows in the middle of last year when values were highest.

However, while the payout obviously has a big impact on financial performance it’s not the only factor to affect profitability.

A speaker at a SIDE (South Island Dairy Event) conference a couple of years ago said he’d had a better result for the year when the payout fell to $3.60 than he had the previous season when it was above $5 because he’d kept a tighter rein on costs when the payout was lower.

P.S. – Cactus Kate, Macdoctor  and Inquiring Mind have posts on Fonterra and Sanlu; and Fran O”Sullivan  is not impressed by the way the company has handled the issue.

6 Chinese babies dead & 300,000 sickened by melamine milk

China has admitted that six babies died and 300,000  became ill after drinking milk made from powder which had been poisoned by melamine.

The scandal has been met with public dismay and anger, particularly among parents who feel the government breached their trust after their children were sickened or died from drinking infant formula authorities had certified as safe.

The Health Ministry’s revised death toll is twice the previous figure, while the new count of 294,000 babies who suffered urinary problems from drinking contaminated infant formula is a six-fold increase from the last tally in September.

“Most of the sickened children received outpatient treatment for only small amounts of sand-like kidney stones found in their urinary systems, while some patients had to be hospitalized for the illness,” the ministry said in a statement late Monday.

The latest statistics show that China’s communist leaders are slowly acknowledging the scale of China’s worst food safety scare in years. During such crises, the government often deliberately releases information piecemeal in part to keep from feeding public anger.

Thousands of parents have been clamouring for compensation for their sickened and dead children. The release of the figures raises the question of whether the Health Ministry is getting closer to finalizing a compensation scheme.

“The new figures are more realistic and objective than previous figures. We knew the previous ones could not have been accurate,” said Chang Boyang, a Beijing lawyer who has provided legal assistance to families of children who became ill.

Six deaths from such a serious and widespread problem still seems very low, although at least it is an indication that authorities are being more open about the scale of the scandal.

Morning Report said that Sanlu, one of the companies most badly affected  by the poisoning, has begun selling milk powder again and that people are accepting reassurances that it is safe.

Fonterra, which has a 40% stake in Sanlu, announced a 60 cents reduction in its forecast payout for this season, partly because of losses associated with the melamine scandal.

Fonterra to write-off Sanlu

Fonterra admitted at the company AGM that it has lost the $200 million it invested int he Chinese company San Lu.

The Fonterra board openly concedes that it has had a difficult time and that San-Lu will going to go down in history as a bad investment for them.

 

When Fonterra’s top brass fronted before the country’s dairy farmers there was not a lot of good news to deliver.

 

Firstly, Fonterra is now admitting it has lost all of the $200 million of investment in the San-Lu joint venture.

 

“For this reason it is increasingly likely that we will have to write off the remaining $62 million of value in our San-Lu investment,” stated Fonterra’s Chairman Henry Van Der Heyden.

 

Fonterra had a 40 percent stake in San-Lu, which collapsed due to the contaminated milk-powered controversy.

 

Fonterra’s management says it is reviewing what went so badly wrong and concedes it had limited control.

That lack of control was the problem. New Zealand leads the world in dairying and one of the reasons for its reputation is strict quality control in every link of the porduction chain.

That wasn’t possible in China which has been a very expensive lesson for Fonterra and its shareholders.

Just a year ago most people thought that the growing demand for milk in developing country would continue to result in high returns for dairy products. But demand is droppping everywhere and while Fonterra’s forecast payout of $6 a kilo is still above the long term average, the white gold rush is over at least in the short term and very possibly for longer.

Sanlu selling assets

Several plants affiliated to Sanlu, one of the companies affected by the poisoned milk scandal, are likely to be sold.

Through its investment in Sanlu, Fonterra Cooperative Group effectively took a share of more than 40 affiliated plants that are interconnected.

Fonterra holds 43 percent of the shares in Sanlu but has already written down $139 million worth of its investment’s book value.

At least four babies died, and another 53,000 were made ill by adulterated Chinese milk powders containing melamine.

The Beijing Review said today that Sanlu expects to have to pay compensation claims totalling 700 million yuan ($NZ188 million) to consumers whose infants became sick or died after drinking its tainted baby formula.

Beijing-based Sanyuan Group is reportedly set to acquire Sanlu’s seven key affiliate milk plants in Shijiazhuang, capital of Hebei Province.

The Wondersun Dairy Co Ltd, based in Heilongjiang Province in northeast China, is also expected to buy a plant in that province.

But details about the acquisitions and disposals of Sanlu’s other factories around the country remain unclear.

 . . . Men Haitao, a spokesman for Sanyuan, told the Beijing Review that the acquisition talks with Sanlu were not finished and declined to give further details.

The analysts said the Sanlu brand was almost certain to disappear from the market given the acute damage to it.

Sanlu scandal tarnishes Fonterra

Fonterra has been ranked sixth in an international ranking of companies most crticised for their impacts on the environment, health and communities.

The list, compiled by Swiss-owned RepRisk, a consulting firm that analyses companies’ exposure to controversial issues and news, was headed by Sanlu Group, the Chinese joint venture in which Fonterra held a 43 percent stake.

Big Chinese rival Inner Mongolia Yili Industrial Group Co took second, and Fonterra was ranked sixth most vilified in the September “top 10” list issued by RepRisk.

. . . Fonterra spokesman Graeme McMillan said it was surprising that the company was featured in a ranking based on media coverage of high-profile news events.

“Our research tells us that people have differentiated quite clearly between the large number of Chinese dairy companies involved and Fonterra,” he said.

“The basis of this ranking seems to be purely media coverage and we have no further information about the criteria that has been applied.

“All along we have taken responsibility for our involvement as a shareholder in Sanlu.

“But what’s disappointing is to see Fonterra listed separately and when there has been no question over the quality and integrity of our products and supply chain, made with milk sourced outside China.

“This incident was isolated to companies sourcing local raw milk in China, which was deliberately adulterated by third party suppliers in a criminal act.”

RepRisk had not contacted Fonterra to confirm the basic facts before publishing its report, he said.

This ranking isn’t about facts, it’s about perception and rival companies will do all they can to play this up.

Fonterra requires strict quality standards from the pasture to the end of production in New Zealand. This ranking, undeserved though it may be, shows why it is essential that it requires the same high standards in any businesses in which it has an investment in other parts of the world.

Organised crime behind melamine milk poisoning

Ministry of Foreign Affairs briefing papers suggest organised crime was behind the melamine poisoning of milk in China.

“The Chinese milk supply has been targeted by Chinese organised crime, which has been adding as a byproduct of the chemical industry, melamine, to raw milk supplied to processing plants,” the paper said.

“The harmful impact on consumers, particularly Chinese infants who are the most at-risk group, is the most serious concern,” the paper said.

. . . San Lu which makes infant formula and in which Fonterra has a 43% stake was one of the companies chich inadvertently used poisoned milk.

The document has been released to the Weekend Herald under the Official Information Act, although large chunks of the report had been deleted.

Among the deleted sections was one on New Zealand’s “international responsibilities”, while another missing piece covered the response by Chinese authorities to Fonterra’s concerns about the milk.

However, part of the paper indicates tension between Fonterra and Chinese authorities.

“Fonterra advises that by mid-September all of the adulterated product should have been accounted for or consumed,” the paper told the Government.

“This suggests that despite the authorities’ reticence to support a full product recall, Sanlu/Fonterra have managed to achieve a similar outcome through a variety of other methods.”

That supports Fonterra which says they did everything they could once they knew there was a problem.

The company has always said its first concern was the chidlren who were poisoned and their families but there were also concerns over its, and New Zealand’s reputation.

However, The Hive  quotes from another Herald story (which isn’t on line) that says that in China it’s Australia which is being associated with the scandal rather than New Zealand.

Perhaps we can thank Cactus Kate for that.

Sanlu sunk?

The Shanghai Daily reports that Sanlu in which Fonterra has a 43% stake is “facing bankruptcy”.  

Industrial experts told the newspaper that it is unlikely a single company will be able to take over Sanlu as its debts total more than 700 million yuan ($NZ169 million) -not counting massive compensation claims.

Chinese newsagency Xinhua said yesterday that 5824 children were still receiving hospital treatment for kidney diseases caused by milk contaminated with melamine, and six children were in serious condition.

Macdoctor reckons Fonterra will have to put this down to experience.

Fonterra responds on ethics

Last week’s NBR led with a story linking the disbanding of Fonterra’s ethics committee with the San Lu crisis and I commented on it here.

The comapny’s CEO Andrew Ferrier responded to the NBR with a letter to the editor this week saying the story was without foundation.

It’s not on line so here’s an abridged copy:

The suggestion that Fonterra has become a less ethical organisation under my leadership is outrageous and I reject it utterly. There is simply no factual basis for this story. . .

The article was entirely based on observations by the former external chairman of our internal ethics committee, Dr Simon Longstaff.

. . . As management and staff at Fonterra can verify, integrity and ethics are absolutely at the core of Fonterra’s way of working and corporate values and of my management style.

It was my decision . . . to disband the committee in the form that it was because I wanted to elevate ehtical considerations to the highest level of management under my personal direction.

Ethics has to be instilled and driven through an organisation from the very top and should not be the responsiblity of a middle and lower level management sub group.

. . . My and Fonterra’s every action in handling the San Lu crisis has been driven at all times by the highest ethical considerations. . . Fonterra’s sole priority was the health and safety of Chinese consumers and taking every practical step within the constraints of the Chinese system to protect them. . .

I have no questions over Fonterra’s ethics and agree with the importance of instilling ethics through an organisation rather than regarding them as an adjunct.

My concern is that Fonterra’s very high standards did not seem to be shared by San Lu in which it had a 43% investment.

Neither company can be blamed for the melamine poisoning which was an act of sabotage. But had the ethics and quality standards which Fonterra requires in every link of the production chain in New Zealand been required by San Lu in China the contamination would almost certainly have been picked up before anyone’s health was put at risk.

The company has learned the hard way about the difficulty of investing in other countries whose systems and standards are so different from ours. But the real test will be what it does now to ensure its standards are met everywhere it operates and that may mean it has to have a majority share in any overseas investments.

Fonterra donates $8.4m to Chinese charity

Fonterra has donated $8.4m ($US 5m) to a Chinese charity to establish a health care programme for mothers and babies in poor rural areas.

“We want to do what we can in China to help, particularly in areas around infant health and maternal issues,” Fonterra chief executive Andrew Ferrier, told NZPA.

He today signed a memorandum of understanding in Beijing with China Soong Ching Ling Foundation secretary Li Ning to fund the programme over five years.

It will set up community centres in rural and underveloped areas, with tools and resources to support prenatal and postnatal care, and provide information to ensure healthy pregnancies and babies.

Babies in poor and rural areas were some of the first reported to be affected by melamine-contaminated infant milkpowders sold by Fonterra’s Chinese joint venture, Shijiazhuang Sanlu Group Co, in which it held a 43 percent stake.

For more than a week reports on the numbers of babies who had become ill had remained at four dead, 12,892 infants in hospital, 104 with serious illness, and close to 40,000 others affected but not needing major treatment.

But Reuters reported this week the number of affected children has risen to nearly 94,000, 46,000 of them in Hebei province, where Sanlu is based, and neighbouring Henan province.

But Mr Ferrier said the $US5m donation was a gesture which should stand on its own as a reflection of the tragedy: it was not trying to link it to the milk contamination.

“Being associated with healthy food to infants…in the environment of this huge tragedy that has happened across the country, we thought that this would be a small gesture that Fonterra could show the broader Chinese community that we really care about children and their health,” he said.

“If we can help Soong Ching Ling Foundation particularly help infant health in rural areas where there’s the most poverty, that’s a great place to be helping out.”

The foundation already has a successful project for the safety of mothers and infants.

The new programme will build maternal and infant community hubs in China’s rural and underdeveloped communities, and will include exchange and teaching programmes to help give local health workers, obstetrical and paediatric doctors, and nurses in rural areas new opportunities to learn best practices in healthcare.

Fonterra has been the biggest exporter of milkpowder to China for 20 years and Mr Ferrier said it was strongly committed: “We are part of Chinese society”.

Sanlu was one of 22 companies which had its milk poisoned by melamine and because it is seen as a Chinese problem, Fonterra’s reputation has not been affected. However, as a shareholder, I am pleased the company is making this donation to help the people and I hope that the best practices include the advice that breast milk is best for babies.

Melamine crisis fuels demand for Fonterra

Demand for Fonterra milk powder has increased in Aisia in the wake of the melamine poisoning scandal in China.

Fonterra Australia’s managing director Bruce Donnison said the company had had numerous enquires from Asian buyers seeking an alternative supply of milk powder.

Separate to its Sanlu investment, Fonterra has been the biggest foreign exporter of milkpowder to China for nearly 20 years.

It has recalled only one batch of its own branded products, some Anmum Materna milkpowder for pregnant women, which was made with Sanlu milk.

It’s fortunate that the melamine poisoning is seen as a Chinese problem and that Fonterra’s well deserved reputation for high quality standards means its produce is still in demand.

More questions for Fonterra

Inquiring Mind asks several questions of Fonterra. in the wake of the melamine milk poisoning in China.

I have some more:

                    What is Fonterra’s policy on advertising infant milk formula?

                     Does it have different policies in different countries?

                    Does it know if San Lu, in which it has a 43% stake, was one of the Chinese companies which contributed to the $765 million spent on advertising baby milk formula in China last year?

Are Fonterra’s ethics up to scratch?

NZ Farmers Weekly has an interview with Warren Leslie, the Dairy Board’s last chief executive, who said:

he would have “moved heaven and earth” to declare a product recall immediately he had information about poisoned milk.

He also said the Board had discussions with San Lu, in which Fonterra has a 43% stake, two years before Fonterra was created but they had other priorities.

“The whole arrangement in China needed to be very carefully thought through … if you don’t start with really good milk you can’t make the range of product we can here.

“The first thing you have to do is to try to get the standards raised. In any investment we might have made anywhere, we would have wanted to put our own people in, get our own standards in place and generally raise the bar,” Larsen said.

Does that mean the Dairy Board would not have been keen on a joint venture, or only invested in a majority shareholding?: “That would have been a matter for the board, but certainly from a management point of view the answer to that is yes.”

Larsen said his reaction to the SanLu crisis was “one of great sadness”.

“If you look at the chart of risk that most corporates use, the model we had had a big centrepiece and it in were the words ‘food safety’. Food safety is absolutely and utterly non-negotiable. Other risks are negotiable in business but if you are a food company your reputational risk, your brand equity is all on the line, and you do not put it at risk.”

So would Larsen, as Fonterra did, have initially settled for a quiet trade recall of Sanlu product, as advised by local Chinese government authorities? : “Like hell I would’ve.”

The NBR reports that former independent chairman of Fonterra’s disbanded ethics committee Dr Simon Longstaff also has concerns about the San Lu investment and said had the committee still been in place:

he was ‘almost certain’ it would ahve been involved from the outset in putting procedures in palce for setting up the joint venture with San Lu . .

Dr Longstaff is now the executive director of the St James Ethics Centre in Sydney. He said ethical considerations for Fonterra include:

* the “health and safety of the consumers of these products” – though Dr Longstaff accepts it’s extremely difficult to try to protect consumers against malicious conduct of others.

* Concerns for the welfare of Fonterra, and its capacity to generate wealth for New Zealand.

* The duty of a really significant New Zealand company not jsut to look after the singular interests of its farmers but also to recognise that whatever it does has the capacity to affect New Zealand’s reputation; and

* Whether the board or senior management have maintained a capacity to deal with these ethical issues in a complex world which “refuses to be tamed by our ignorance”.

“Most ethical questions are not good versus bd, right vbersus wrong – it’s competing interests all being [weighed],” Dr Lognstaff said. “The thing about making good decisions – it’s not jsut a matter of common sense. It requires engagement, confidence and you’ve got to care. If anyone in the company was involved in a decision which sought to place the interest of the company or its partners in China ahead of the children, then that in my mind would be fudnamentally wrong. A betrayal of the ideals of New Zealand.”

I don’t believe that Fonterra deliberately put commercial interests ahead of children’s lives. But I do wonder if the company had all the information it needed before it went into partnership with Sanlu; and the delay between its representatives on the board discovering there was a problem with melamine poisoning in the milk and the public recall indicates major deficiencies in its procedures for dealing with serious quality issues.

Inquiring Mind comments on and links to the NBR article here.

Melamine map

Our competitiors will love this:

New Zealand is in purple, denoting that melamine has been found in products here. It doesn’t explain that it was in minute quantities: New Zealand Food Safety Authority Dr Geoff Allen said:

“Without exception, all results fall below the safety threshold set by NZFSA, and also fall below any safety limits set by other food safety regulators around the world including US and EU,” he said.

NZFSA has set a 1ppm limit on melamine in infant formula, a 2.5ppm limit on melamine in foods on shop shelves, and a 5ppm limit on foods which might be used as ingredients.

“From all 116 tests there is clearly no indication of any deliberate adulteration,” he said. “Based on results to date we are confident that all New Zealand dairy products are fully compliant.”

Tatua chief executive Paul McGilvary told NZPA though the NZFSA, and major multinational food companies including Nestle and Heinz have argued that low-level melamine contamination does not pose a health risk, the Chinese dairy scandal involving Fonterra’s joint venture Sanlu has triggered consumer sensitivities around the world.

Global markets had been sensitised to melamine contamination, and consumer perceptions were important even where contamination levels were so low they did not present a health risk, he said.

Emotion and perception will beat the facts in food safety and our competitors will be very keen to use this to their advantage if they can.

NZ food less trusted

Chinese people are less likely to trust New Zealand food in the wake of the melamine milk poisoning scandal. 

Just over half (51.2 percent) of respondents said they were now less likely to trust New Zealand brands of dairy or other food products than they did before. However, New Zealand still came second when consumers were asked to rate which country’s food products were the most trustworthy – behind the European Union but ahead of the United States, Canada, Australia, Japan and China in that order.

That New Zealand food is still regarded as trustworthy is some consolation but:

Sinogie Consulting chief executive Bruce McLaughlin, who is based in Shanghai, said he was surprised New Zealand’s reputation as a food producer had not suffered more.

“People are well aware that it was Fonterra who was involved with Sanlu,” he said.

It was luck not judgement that Sanlu in which Fonterra has a stake wasn’t the only company which used poisoned milk and there are 21 other brands with similar problems. 

Given that, if I was Chinese I’d find it very difficult to trust any food at all and I’m taking a great deal more interest in the fine print on labels when I’m in the supermarket to ensure I’m not inadvertently buying food from China.

Update: Roarprawn notes that the company carrying out the survey is working for our competitors.

Leaked memo suggests Sanlu paid hush money

A leaked memo, supposedly from Sanlu, suggests the company was paying to keep the story about poisoned milk quiet.

Fonterra says no-one on the board of the company, in which it has a 43% stake,  knew of this.

Radio NZ  has more on the story including a denial from Fonterra it will be forced to give up its share in Sanlu.