By Allan Barber
It may be a statement of the obvious, but the effects of Fonterra’s botulism scare will last much longer than originally hoped or imagined.
Its impact on New Zealand’s international trade reputation gives the impression of being more disastrous than an outbreak of foot and mouth disease, always assumed to be the biggest disaster that could possibly happen.
Economically there is no comparison between the two, because the botulism that wasn’t has initially done no more than cause infant formula manufacturers a loss of business.
There has been no apparent impact on dairy payouts or even global auction prices.
Fonterra appears to be pretending the whole saga wasn’t even its fault, if its reaction to Danone’s damages claim is any guide.
In contrast FMD would cause enormous loss of livestock and the economic devastation would be vast.
But, as can be seen from the experience of the UK, Europe and South American countries where it lies dormant and erupts at intervals, there is life after FMD. It poses no danger to human health, but enormous economic and physical upheaval at the time.
Fonterra, unwittingly because of its ham-fisted management of the botulism scare, has in one swift move caused untold damage to New Zealand’s reputation for food safety.
There is nothing anyone can do to recover that reputation quickly, regardless of conversations between the Prime Minister and Chinese President, apologies from Fonterra delegations, or more stringent inspection procedures.
These are all akin to shutting the stable door after the horse has bolted.
Only time and continued avoidance of repeat disasters can repair the damage.
The effect on New Zealand’s economy is unlikely to be particularly big in the short term, merely falling disproportionately on a few infant formula manufacturers.
But there has already been a significant decline in sales of New Zealand dairy based products in China, trade with Sri Lanka has stumbled, and Russia’s reaction has pushed a free trade agreement way off the agenda. It looks as if Putin didn’t even want to talk to John Key at this year’s APEC talks.
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Apart from the potential damages claims, Fonterra appears to have got off almost scot free from what can only be judged as a monumental cock-up.
In war zones the casualties would be termed peripheral damage. That must be how the infant formula manufacturers and possibly exporters of meat to Russia are feeling about the whole debacle.
From an academic point of view the Fonterra and ministerial enquiries will hopefully reach a conclusion about what actually happened. However the key events appear to have been the decision to get AgResearch involved in carrying out tests in June which the crown research institute wasn’t fully qualified to conduct; then there was the decision to blow the whistle without cross-checking AgResearch’s initial results.
It will be interesting to see if any responsibility is attributed to the major BCG inspired restructure within Fonterra which has seen large numbers of senior and middle management leaving the company or having to reapply for their jobs.
There is no doubt such restructures achieve financial objectives, once the new structure settles down, but they involve much unrest and the loss of institutional capital.
With no knowledge of the inner workings of Fonterra, this can only be speculation, but it must be asked if the new broom, in the form of Theo Spierings with support from BCG, has generated a regime where senior managers are either afraid or lack the knowledge to speak out.
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Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he runs a boutique B&B with his wife. You can contact him by email at allan@barberstrategic.co.nz or read his blog here ».
5 Comments
Fonterra took the sample to the fastest appropriate lab in NZ to seek a clear result. As this is the fastest way to test, shipping an unknown potentially lethal bioactive substance across borders into the US is a huge undertaking.
They got a "not clear" result. If it was "clear/identified" then the matter would be resolved.
As such they must act immediately on that result of "not clear"
(1) issue hazard _warning_ as a precaution.
(2) go for the longer, much more involved accreditted testing in the US
While they are waiting, as a precaution, all food stocks were traced as fast as possible and put on hold.
They get an "all clear". thus things are ok, Fonterra has been transparent, and followed best options.
The situation which caused the problem was well outside SOP and had to resort to alternative solutions. Solutions which at the time were expected to be non-hazardous...which turned out to be completely justified and correct.
How you you and other airchair critics have handled it Alan?
- Would have "covered it up"....then what would happen when word got out?
- Gone for the highest cost testing with an unknown sample straight up...and all other unknown samples every time? There are hundreds if not thousands of tests that are proved clear with the above methodology. are consumers going to pay the the shelf price for your expensive paranoia?
- Set up Fonterra/NZ labs that "test for absolutely everything" regardless of cost, and that things like botulism haven't been spotted in NZ for decades.
- Not issued the precautionary recall? Or waited the extra months for the final test results to come in? What song would you critics been singing if it had been positive? If babies had died? and you critics had sat on the info..... Remember how much people screamed about the eColi coverup, or the Melamine delay??
Front up with some answers Alan. Easy to go with the crowd, kicking the approved target of the month.
The biggest and most important test of Fonterra was to their traceability systems. To give due credit they appear to have passed this side of things very comfortably. There will be many other food industry companies both within and beyond New Zealand looking and going, wow ,we couldn't even come close to that.
Alan, But there has already been a significant decline in sales of New Zealand dairy based products in China to what do you refer here? Fonterra is having it's products fly off the shelf , in to the arms of consumers, in China.
The media in NZ seems to have more of an issue with this than anyone else - it must be a slow news day to keep harping on about it when the goverment inquiries are yet to produce their findings.
Foot and Mouth would be a man-made disaster - after all there is absolutely no reason from a human or animal health point of view to destroy stock. It can, and is in many parts of the world, farmed through an outbreak. But politics will ensure it really would be a disaster for NZ.
I hope Fonterra does prove its case against the naysayers and damage seeking litigants, as there's already talk of representative action on behalf of shareholders and suppliers for exposing us to such damages, as the "orange flag" of using reprocessed proteins for such high profile sensitive customers and product is proving to not be in the best interests of the company
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