Fonterra's third infant formula contamination scare in six years has cast doubt on New Zealand's '100 percent pure' branding.
Last week Fonterra revealed more than 60,000 cans of milk powder may have been contaminated with a deadly botulism-causing bacteria, and although no illnesses or deaths as a result have been reported, there are fears New Zealand's international reputation as a food supplier could be irreparably damaged.
China, our largest export market for dairy, has put a hold on importing infant formula made from Fonterra products. BusinessNZ CEO Phil O'Reilly says they've taken a "nuanced" response to the scare in not banning all Fonterra products, like Russia has.
"Milk products, particularly for infants, in China is massively important," he said on Firstline this morning.
"At the end of the day the Chinese government needs supply to their citizens, and I think that's why you've seen a nuanced response out of them – they haven't banned everything coming into their market, they're talking very closely to no doubt our government about this."
What Fonterra and the Government do next is vitally important to our reputation, says Mr O'Reilly.
"The CEO did exactly the right thing to turn up in Beijing yesterday and apologise, and no doubt he'll be working closely with officials and customers in that market.
"The Prime Minister did the right thing about getting out on the front foot. Expect to see some pretty senior ministers, perhaps Tim Groser, travel to China sooner rather than later. The way they're managing this now, it matters quite a lot to our reputational damage."
- READ MORE: Full coverage of the Fonterra botulism scare
New Zealand's '100 percent pure' branding might take a hit, but Mr O'Reilly says it's not as important on the international scene as Kiwis realise.
"When I travel around the world, at least as important is our reputation for transparency and our very low corruption rating. That actually plays out as a strength right now – the fact that we're trying to be transparent, the fact that when Fonterra or when MPI says something, it's likely to be believed."
He says business leaders and the tourism industry is working on "how we might think about that pure New Zealand image going forward".
"When we go out into the world, our relationship with the world's much more complicated than often it's portrayed back here in New Zealand. There's much more to it than just saying it's about pure water and pure food, although that's very, very important, of course."
Fonterra's share price initially fell 8 percent yesterday, but recovered to end the day down only 3 percent. Other New Zealand dairy companies didn't fare too badly either – Synlait was down only 1c, and A2 Corp didn't budge at all.
3 News business editor Michael Wilson says it's because no one's fallen ill – yet.
"If people got sick, as they did in the Sanlu incident when thousands got sick and I think six people died… this at the moment is not in that situation," he said on Firstline this morning.
"It is a scare about contamination and the possibility that people could get sick. As yet, no one has. It's reputational damage, but it's not devastating at this stage, but there's still obviously a long way to go."
With questions surrounding the four-month delay between discovering the potential contamination and telling the Government and public, Mr Wilson says there could be inquiries – internal and external – into whether any market rules were broken.
"I'm sure there will be some Fonterra shareholders who feel aggrieved."
The New Zealand dollar rose this morning to 78.05 US cents, after dipping yesterday.
"The measured response by China has encouraged people that we could see a lesser impact than we first thought," says Sam Tuck of ANZ New Zealand.
"At the open yesterday everybody thought the dispute might be protracted. (But) the majority of exports to China are probably unlikely to be affected, which makes a huge difference."
Whether it has an impact on GlobalDairyTrade auction prices remains to be seen.
source: newshub archive