Brand damage could be ‘substantial’, Fonterra warned
The China milk powder scam has the potential to cause substantial reputational damage to Fonterra and New Zealand, an expert says.
Chinese police on Monday arrested 19 people in Shanghai for selling about 300 tonnes of expired Fonterra milk powder, Shanghai Daily reported.
Fonterra backed the enforcement steps and said it appeared the criminal activity had been ‘‘much further along the supply chain’’ as it gave its direct customers guidelines about how to manage expired product.
But Hwee Ang said this did not distance the company from being implicated in some ways.
‘‘Fonterra argued that this is a one-off, but it has previously made a lot of ‘one-off’ mistakes so surely we cannot treat each new problem as a one-off. It’s the same company.’’
He said Chinese consumers were increasingly sensitive to food safety and quality and there was a high chance of bad news like this going viral on social media.
‘‘The potential damage here can be substantial as it might also entice the Chinese authorities to impose restrictions. Let’s hope we do not have to go there.’’
Hwee Ang said the scam raised the question of how much control and effort Fonterra put into managing its engagement in China.
It was not good enough to simply export a product and then keep your distance from consumers, he said.
‘‘Even expired milk powder needs to be traced back and destroyed as this concerns food safety.
‘‘The operational aspect in China needs to be reviewed and adjusted from this case, not just to work out what happened.’’
Reports said one of the suspects allegedly sold the expired products to another company, which in turn resold almost 200 tonnes to distributors who sold them online or in wholesale.
Fonterra spokeswoman Maree Wilson said on Monday that the company was not directly involved in this case – the issues related to alleged criminal activity much further along the supply chain.
Wilson said that, to Fonterra’s knowledge, the milk powder was not being resold with Fonterra packaging.