The U.S. Dairy Exporter Blog: Market Analysis, Research & News

  • Fonterra Botulism Scare Shows Cost of Food Safety Crisis

    By Margaret Speich June 11, 2015

    Globe7USDEC has developed a preparedness plan that will help members protect public health and restore confidence should a crisis occur.

    We were reminded again this week how a food safety crisis, whether real or perceived, can financially impact a dairy business for years.

    As reported by Mark Astley at DairyReporter.com, Nutricia New Zealand is experiencing ongoing fallout from a Fonterra botulism scare that occurred nearly two years ago. The revelation came as Nutricia posted a financial report showing losses after taxes in 2014. You can download a pdf of that report here.

    "The accounts record a small loss after tax of $1.191m," said Corine Tap, managing director, Nutricia Limited, in a statement made to DairyReporter.com.

    "While recovery from the recall is still ongoing, this includes costs incurred transitioning to alternative ingredient suppliers for its products following the Fonterra (false) botulism scare of 2013," she said.

    When it comes to food safety, the U.S. dairy industry has a strong record. But the Fonterra situation is a reminder we cannot rest on our laurels, since anything can happen in today's highly competitive global environment where complex production and distribution channels are intrinsically linked, and rumors spread across continents in milliseconds. 

    We need to remember that a U.S. dairy export crisis can begin anywhere, and need not be true to have a huge impact. That's because our business is global, and even problems at a local level can have global implications. The U.S. dairy industry has worked hard over the years to increase the level of dairy exports to nearly 16 percent of total milk production in 2014. With this growth in exports comes a greater responsibility to protect our overseas markets. One way to do so is make sure the industry has strong, comprehensive crisis preparedness plans.

    Even respected and successful exporting companies like Fonterra have had to respond to food safety issues in recent years, and the botulism scare is an informative case study.

    In 2013, initial laboratory tests raised the suspicion that some whey protein concentrate manufactured by Fonterra and shipped overseas was contaminated with botulism-causing Clostridium botulinum. Subsequent tests ruled out the presence of C. botulinum.The temporary ban that China imposed on the import of New Zealand whey powder alone was damaging. But the damage to New Zealand's reputation as a safe-food supplier also was significant as well as incalculable.

    Danone terminated its supply contact with Fonterra. It has also filed a lawsuit.

    Almost immediately following the incident, Fonterra commissioned an inquiry to find out what went wrong so it can avoid future situations. The conclusions of this and other follow-up reports pointed to several deficiencies in Fonterra's response. Among the problems: lack of senior oversight of crucial decisions and problems with tracing potentially affected product, according to news reports.

    In a headline, The New Zealand Herald summed it up this way: "Botulism report: Fonterra lacked plan."

    As New Zealand learned, it is especially important to be cognizant of China in these scenarios. Chinese consumers are very sensitive to any kind of real and/or perceived food safety issue. And, rightly so, due to a legacy of food scandals during the past 10 years, including the 2008 melamine public health threat that involved dairy products manufactured in China.

    China is a large export customer for the United States—in fact, it has become our second largest export market by country with nearly $700 million of U.S. products sold to China last year. If the safety of a U.S. product were ever questioned, our first concern must be the health of Chinese consumers. Through our crisis preparedness and traceability efforts, we can express our concern and take appropriate action in a timely and effective manner.

    Realizing the potential importance to U.S. dairy suppliers, I have been leading a multi-year effort at the U.S. Dairy Export Council to update our comprehensive crisis preparedness plan to help minimize potential vulnerabilities for our industry and create a platform for effective crisis communication in our top overseas markets.    

    The goals of our global crisis preparedness plan are three-fold:

    1. Protect public health. This is paramount, as we seek to ensure the health and safety of our international customers.
    2. Restore confidence in U.S. dairy should a food safety crisis occur.
    3. Work toward full market recovery, while leading U.S. dairy's international response.

    We've made progress, but there's much more to do. Among other things, we have reached out to USDEC members to help them develop their own crisis response plans.

    Our goal is to support greater crisis readiness among USDEC members who have a significant stake in our most vulnerable markets and equip them with tools to elevate their level of readiness for export-related crises.

    As this week's news revealed, the cost of a poor response can have long-lasting effects, costing millions of dollars and putting your company in court for years to come. A strong crisis readiness plan mitigates that risk and is well worth the investment.

    It's important for our U.S. dairy processing companies, for our exporters, for our farmers—for everyone across the industry—to be able to handle any kind of crisis. It's been shown that those companies and industries with strong, comprehensive, well-funded plans have been able to manage crises more effectively and, most of all, recover faster.

    USDEC members logged into our password-protected website can view a crisis readiness webinar and find other resources on our issues management page here


    The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products   

    Member Services New Zealand Crisis Management Food Safety
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