2013 Precautionary recall
Food safety is always our number one priority.
Update: outcome of the arbitration with Danone regarding Fonterra’s WPC80 precautionary recall in August 2013
Fonterra has received and considered the result from the arbitration with Danone on claims arising out of Fonterra’s WPC80 precautionary recall in August 2013.
The tribunal has determined that Fonterra must pay a total of NZ$183 million to Danone.
It is disappointing that the arbitration tribunal did not fully recognise the terms of our supply agreement with Danone, including the agreed limitations of liability, which was the basis on which we had agreed to do business. Fonterra is in a strong financial position and has the facilities to fund costs suffered by Danone.
We have assessed the potential financial implications of the decision. In response we have made the prudent decision to revise the forecast earnings per share range for the 2017/18 financial year from 45 to 55 cents per share to 35 to 45 cents per share.
On Friday 2 August 2013, after a period of extensive testing we concluded that we had a potential food safety risk with three batches, or 38 tonnes, of a particular type of whey protein concentrate called WPC80. The tests showed that this risk was minute but, that it was a risk nonetheless.
We advised New Zealand’s Ministry for Primary Industries, the eight commercial customers who had received the potentially affected product on August 2; and publicly announced the precautionary recall just after midnight on August 3.
Our commercial customers use whey protein concentrate in a range of products including infant formula and beverages. This means that while the potentially affected WPC80 was 38 tonnes of a Fonterra ingredient, the final products it was in were those of the eight customers and were sold under their brand names.
When we alerted our eight commercial customers, they immediately began to investigate where in their supply chains products containing the affected WPC80 were and whether any of this product was on retail shelves.
Most of the products were found in our customers’ own warehouses – meaning they were able to put them aside and ensure they would not reach retail outlets. Some products were already available in stores, these were subject to product recalls.
Our Chief Executive has apologised for the anxiety caused. At Fonterra, we put food safety above all else, and it was for this reason that we immediately informed the Ministry for Primary Industries, our customers and the public even though we did not have all the information about product location on hand. Our priority was to alert people to the potential risk as we continued to gather facts and, along with our customers, identify and contain affected products.
Fonterra is committed to providing high quality dairy products to our customers and to people around the world, and to putting safety above everything else we do.
We ensure the quality of our world class product is protected as it journeys from our farms to homes all around the world. That’s our promise to you. That’s Trusted Goodness™.
WPC 80 Inquiry 18 Month Review - 21 October 2015 [PDF]
Fonterra announces outcome of Danone arbitration - 1 December 2017
Fonterra requests temporary trading halt - 1 December 2017
Fonterra welcomes government inquiry report - 12 December 2013
Fonterra publishes findings of its Operational Review - 7 September 2013
Fonterra announces findings of its Operational Review - 5 September 2013
Fonterra relieved about 'all clear' from Clostridium botulinum - 29 August 2013
Fonterra advises of quality issue - 4 August 2013