Danone a little shaky on moral high ground
French food company Danone should be more concerned about its own chequered history than suing Fonterra, says Judith Galtry.
IN EARLY January, Paris-based multinational food group Danone announced its intention to sue its primary dairy supplier, Fonterra, and to terminate its supply contract. Danone, the parent company of infant formula manufacturer Nutricia, claims a loss of revenue and poor handling by New Zealand’s dairy giant as a result of the botulism contamination scare in 2013.
While the alleged tainting of some Fonterra whey protein used in infant formula manufacture turned out to be a false alarm, it resulted in product recalls across several Asian countries, including China, and claims of losses in consumer confidence. But while Danone estimated the cost of the recall to be €350 million ($NZ575m), its case against New Zealand’s dairy giant could also be seen as a case of ‘‘larmes de crocodile’’ (French for crocodile tears).
One aim may be rebranding, including a diversion of consumer attention away from its own recent negative publicity and tarnished image. Like most other breast-milk substitute companies, Danone is a multimilliondollar operation with a huge marketing budget. It is the second largest baby food marketer in the world after Nestle.
Danone’s recent exponential growth is mainly because of its Asian markets, which account for 40 per cent of its business. Much of this is in China, where, in 2012, Danone had the third largest share with a 9.2 per cent market share. In China, infant formula sales hit 77.86 billion yuan (US$12.72 billion) in 2012, up 26 per cent from a year earlier, according to market-research firm Euromonitor International.
But is Danone in a good position to take the moral high ground over Fonterra’s botulism botch up?
In 2013, Danone was one of several world infant formula companies accused of corrupt marketing practices in China.
These included claims of false health benefits on labelling and marketing of infant formula in hospital and maternity settings through bribing health workers or providing free samples to expectant and new mothers. All of these, including marketing formula for infants under 6 months, breach World Health Organisation standards.
Last year, Save the Children reported
In 2013, Danone was one of several world infant formula companies accused of corrupt marketing practices in China.
that research in six Chinese cities in late 2012 found that 40 per cent of the 360 mothers interviewed said they had been contacted directly by baby food companies’ representatives. Almost 80 per cent of these mothers said the representatives had recommended their companies’ products or given them free formula samples.
While several companies were involved, Dumex (Danone’s infant formula unit) was the company reported to have most frequently made contact with new mothers as well as distributed free samples. It is well established that when free formula samples are given to new mothers to feed to their babies the mother’s ability to breastfeed is undermined.
Then, in August 2013, hot on the heels of Danone’s product recalls linked to Fonterra’s contamination warning, Danone was among six leading dairy companies fined for price fixing and violating anti-monopoly laws in China. Foreign milk powder prices had significantly increased in China following the 2008 melamine scandal, where at least six babies died. Within days of the price fixing investigation being announced in July 2013, Danone and Nestle had reportedly reduced some prices by as much as 20 per cent.
A month later, in September, Danone’s Dumex announced it would immediately start an investigation following a China Central Television report that Danone had made payments ranging from several hundred yuan to about 10,000 yuan (around NZ$2000) in various forms of ‘‘sponsorship fees’’ to doctors and nurses in Tianjin to help sell its products.
This sorry saga shows that infant formula marketing is often a dirty business. China is experiencing declining breastfeeding rates, with rates far lower than those in many other countries. Globally, nearly 40 per cent of infants younger than six months are breastfed, while in China that figure is just 28 per cent, according to UNICEF.
Many within the country are also trying to promote breastfeeding but despair of intense breastmilk substitute marketing tactics, often targeted at mothers of newborn babies. But public health advocates do not generally have large public relations budgets. They struggle to hold the line in terms of international best practice infant feeding.
Multinational food marketers may sue each other for perceived threatening of food safety, but who can sue them when they are actively undermining breastfeeding?