This is the third infant formula crisis that Fonterra has been involved with. Time to go.

Fonterra was given privileged status because it was supposed to benefit the entire economy. Instead it's putting NZ inc at billion dollar risk. 

First it was plastic. Then it was fertilizers. Now it’s botulism. What next in baby’s milk – the Ebola virus?

That’s what the world is thinking about us right now. And in business, perception is everything.

While Fonterra might not be directly responsible for the first contamination (melamime), and mistakes and dirty pipes happen (DCD and botulism), they are 100% responsible for the scandals and the fall out every time.

It was only a few months ago that I wrote this blog on how badly Fonterra handled the DCD scandal. 

Back then they behaved in exactly the same way. They turned what was a relatively minor problem into a fully fledged disaster because they failed to front. They didn’t release information about the science around DCD to the public, demonstrating that they don’t trust consumers to make informed choices. Chief Executive Theo Spierings blamed the media for risking New Zealand’s economy by writing about it. That’s like finding horse meat in Lasagne and then blaming the media for reporting it.

From now on, when there’s bad news, consumers in New Zealand and the world will assume Fonterra aren’t telling the full story. Trust has been broken, and in the marketplace that’s a hard thing to get back.

The irony is that scandal could have been turned into an opportunity. 

In the 1990s, hamburger chain ‘Jack in the Box’ had a bacterial contamination (undercooked burgers) that killed three toddlers. Rather than run for cover, they fronted media and took full responsibility. Then they transformed the crisis into an opportunity. They were genuinely horrified and felt they had a moral obligation to make changes. They remade their entire corporate culture from top to bottom and introduced a state of the art food handling process. 

Jack in the Box became an industry leader in safety and health procedures. 

A healthy does of transparency can make all the difference. 

It worked for Tylenol in 1982. After several people mysterious died from taking the aspirin like pills, Johnson & Johnson discovered their pills had been contaminated with cyanide. 

Hard to think how a company could recover from that. But they not only recovered they grew. First they put the company profits aside and alerted consumers via a huge media campaign. They recalled all bottles of pills, even offering to buy back pills from people. They were praised by the media for doing the right thing. The public trusted them to put social responsibility first, and were prepared to buy Tylenol again. Johnson & Johnson went on create the world’s first child safety tops on pill bottles.

Fonterra’s management team should hang their head in shame and fire their PR company.

The co-operative model works in a small country like New Zealand. But Fonterra has demonstrated once again, it can't be trusted with the crown jewels. The company needs to be broken up and its decade-long privilege withdrawn. Let’s have multiple dairy export co-operatives, and spread the risk instead of being held hostage by a company with a sense of entitlement and a culture of hiding when things get tough.

Comments (3)

by Richard Clark on August 05, 2013
Richard Clark

To create a small New Zealand business give them a big one and wait. 

by stuart munro on August 06, 2013
stuart munro

Quite right. The monolithic corporations have done little or nothing for the fishing industry too, besides try to cement slave shipping in place (Charters were supposed to be a transition on the path to a developed fishery).

Artisanal operators are much better innovators than these Kaiju corporations. The only thing is, they offer few or no board-level sinecures for retiring politicians.

As for Fonterra's QA - clearly it was never a management level priority. I'm sure they have ISO manuals in abundance, but for them it was never more than a marketing ploy. TQM consists in understanding why you don't have problems - Fonterra just ain't there yet.

by william blake on August 08, 2013
william blake


Huge 'what ifs', but what if there had been infant fatalities in China (9% infant botulism fatality with less than optimum hospitalisation. WHO.) What kinds of pressure would the Chinese government be bringing to bear on NZ and how far would we go to appease our primary dairy market?

 Fonterra executives could face extradition if the current administration changed the law to suit the circumstances and to curry favour, al a K dotcom, Hollywood and the GCSB bill.

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