Faith in New Zealand ‘shattered’
The Fonterra botulism scare appears to be contained. But the work to rebuild New Zealand’s battered reputation as a premium food producer is just starting, writes Andrea Fox.
After this event, the Chinese consumer and the [Chinese] government cannot tolerate any more. . . . This is the last chance to get it right.
Professor Henry Chung
AS New Zealanders move on from Fonterra’s botulism food safety fiasco, disillusioned Chinese people are cancelling their plane tickets to this country.
While Kiwis’ faith in Fonterra is bruised, China’s trust in New Zealand is shattered, say experts in the culture of our biggest export customer.
‘‘The injury is very deep,’’ says expat David Mahon, a veteran investment adviser in Beijing.
‘‘People have cancelled visits to New Zealand because it is not 100 per cent pure,’’ says Massey University associate professor of marketing Henry Chung, who has studied the Chinese market for more than 20 years.
‘‘After this event, the Chinese consumer and the (Chinese) government cannot tolerate any more. If anything happens again, any explanation will be considered redundant.
‘‘This is the last chance to get it right.’’
Strong words, which many Kiwis will no doubt brush off as an over-reaction to a food safety scare that has claimed no victims.
But they help explain why no fewer than nine senior Government ministers, including the Prime Minister John Key and Finance Minister Bill English, hastily formed a damage-control team when New Zealand’s biggest company and controller of 90 per cent of the dairy industry dropped its botulism bombshell in the wee hours of last Saturday.
There is, so far, no health crisis. But it seems our relationship with our biggest export market, which accounted for $2 billion of Fonterra revenue last year, is on a knife edge.
Chung and Mahon say the reason is simple: Fonterra IS New Zealand, and New Zealand and China had a unique and long relationship.
Mahon says: ‘‘New Zealand has been trusted more than nearly every other OECD country. We were in a special category and have been viewed that way since 1949 (the year of the communist revolution).’’
‘‘There is an unbroken relationship of trust that New Zealand was different. In the space of 12 months we have managed to unravel that. ‘‘
Chung, who migrated to New Zealand from Taiwan 20 years ago, says Chinese people are very aware that New Zealand was the first country to recognise their government, and the first country with which they signed a free trade agreement.
‘‘People in China are asking a very interesting question – ‘if New Zealand [product] is no good, who else is good?’. That is being asked by a lot of consumers.
‘‘That is a compliment, but it’s also a huge responsibility to deliver a high-quality, and most importantly, healthy product.’’
Trade and marketing experts say the injury being felt by Chinese consumers is because New Zealand has heavily promoted the ‘‘pureness’’ of its export products – and extracted premium prices for it.
And because of China’s own poor food safety standards, evidenced by a string of scares and casualties, its people have come to rely on New Zealand food – dairy in particular.
That faith has been sorely tested this year.
In January, China and New Zealand’s other food safetysensitive Asian markets were jolted by an announcement out of the blue by the Ministry for Primary Industries (MPI) that Fonterra. several months earlier, had found traces of DCD, a nitrate inhibitor, in its products.
More recently, hundreds of tonnes of New Zealand meat was banned entry at Chinese borders because it had not been correctly certified after MPI was created from the old Ministry of Agriculture.
Then last weekend came the announcement that Fonterra, which brings in 25 per cent of New Zealand’s export earnings, had, five months ago, in March, found ‘‘elevated’’ levels of a botulism strain in whey protein concentrate it had sold as an ingredient in the making of baby formula, as well as other products, including sports drinks, yoghurt and animal feed.
On July 31, Fonterra told Kiwis that it had received the results of tests on the previously flagged strain which confirmed it had the potential to be toxic.
As some of the product containing the potential toxin had already been sold, customers had been alerted, Fonterra said.
Fonterra quaintly headlined its announcement ‘‘a quality issue’’, and said the potentially affected product involved 38 metric tonnes of whey product manufactured at its Hautapu processing plant near Cambridge.
By Wednesday Fonterra was saying it was confident it had secured the location – domestic and international – of all potentially affected product.
On Thursday, the Government, which sent MPI officials into Fonterra’s plants and offices to do an emergency audit, confirmed the whey product was confined to three batches made at Hautapu last year, and that no other New Zealand dairy products were affected.
No one was sick, no-one had died.
THE frenzy is over, but the reckoning is to come. Mahon, who has been a consultant to Fonterra in China, is critical of Fonterra’s handling of the botulism scare alert, saying it ‘‘drip fed’’ mixed information which had the effect of ‘‘traumatising’’ Chinese people.
‘‘It wasn’t up front or with clarity, all good reasons for people here to have a crisis of confidence over New Zealand – and it’s cumulative.
‘‘The sense is what is New Zealand doing? Do they take China seriously as a market, or are they throwing product at us?
‘‘The sense here is that they used to trust New Zealand, it was a place of integrity. That is now doubted.’’
Mahon says there has been ‘‘‘huge’’ damage to New Zealand’s credibility in China and he believes a concerted, long and sincere ‘‘campaign’’ by this country in China is necessary if the relationship has any chance of being restored.
’’It is my understanding that what the market expects . . . [what] the consumer wants to have explained to them is why this took place, what was the issue and how is it no longer an issue.’’
Fonterra chairman John Wilson responded that the company’s efforts in China would be ‘‘ongoing’’.
‘‘Fonterra must always earn the respect, and no doubt at a whole lot of levels we know right now. That’s why I apologised.
‘‘There was confusion in the first days because it was not Fonterra itself recalling product, it was our customers.
‘‘The sheer complexity of that, to all of our concern, meant the messages were mixed and not as simple as we would obviously have liked.’’
Multiple inquiries will flow from the fiasco.
Fonterra is conducting two of its own and Key has promised an official Government inquiry, one outcome of which could be a new regulatory regime for Fonterra and the deregulated dairy industry.
Labour rural affairs spokesman and former agriculture minister Damien O’Connor suspects the Chinese Government is demanding nothing less of New Zealand than new regulations and oversight for dairy plants.
O’Connor expects the $14 billion dairy industry’s current self-regulation model to be challenged by customers who, he says, will expect a high level of scrutiny from an agency which will be responsible to the Government.
‘‘The Opposition will be demanding these inquiries be truly independent. I don’t think customers of Fonterra or New Zealanders will trust Fonterra to do an investigation on their own failings.’’
O’Connor says the official inquiry should be headed by a high-level judge or other independent person ‘‘who can demand answers of anyone and everyone . . . who the public will trust to get to the bottom of this. Because it is New Zealand Inc’s reputation at stake here.’’
O’Connor says it must be acknowledged that Fonterra has produced millions of tonnes of dairy product over the years that have been ‘‘admirably safe and high quality’’.
He suspects things have gone wrong at Fonterra because the company’s leaders have been focused for two years on the cooperative’s capital restructure.
Massey’s Henry Chung welcomes the prospect of more regulations.
‘‘We have hundreds of ‘New Zealand’ dairy brands in China now . . . and I don’t know them and have never heard of them, and I’m meant to be a specialist in New Zealand brands.
‘‘Every time a product goes out, we need to make sure it is high quality because in the end they [China] don’t view Fonterra as Fonterra, they view it as the whole country.
‘‘One tiny thing can ruin the whole country’s image.’’
Chung says the priority should be to regulate the middlemen, manufacturers who buy milk powder, process it and export it as New Zealand-made.
Another priority for regulation should be chemical use.
‘‘The Government should make sure the product is [actually] the product. That it contains no other unnecessary chemical. The Chinese consumer wants ‘pure’.’’