About 30 small-to-medium-sized companies are said to be suffering on-going adverse effects from the Fonterra botulism scare and some are at risk of going belly-up.
SMEs that manufacture and supply infant formula for overseas markets, especially Asia, stand to lose millions of dollars from the false alarm in August.
New Zealand Infant Formula Exporters Association chairman Michael Barnett said up to 30 New Zealand companies which had been directly affected could lose up to a $2 million dollars a year until the Asian market had regained confidence in New Zealand products.
The longer Kiwi products were off the shelves, the more likely it was consumers would be lost to Australian, French and European suppliers, he said.
There was still New Zealand infant formula sitting at the Chinese border and being held in New Zealand, he said, though he could not quantify how much.
The SMEs had made a huge investment in developing the market, he said.
Barnett said some SMEs would not have the strength to survive.
Infant formula supplier, Avante International, did not use Fonterra’s whey protein concentrate but managing director Steve Darling said that «made no difference» to mainstream China consumers who associated dairy products in New Zealand with Fonterra.
Darling said he expected the company could lose up to $10m in export revenue.
Avante was set up four years ago and exports $19m worth of infant formula a year to China and Hong Kong, with Taiwan next on the agenda.
Darling said he had travelled to Asia to reassure distributors and agents that Avante products were safe in order to keep merchandise on the shelf.
«We will get through this but we don’t know what the landscape will be on the other side, or if it’ll ever be the same.»
Other companies were not faring as well, he said.
Some manufacturers were operating at a fraction of what they were before the botulism scare and some had to lay off staff after sales slumped.
«My gut feeling is that a lot people will give up,» Darling said.
Barnett said he was unaware of any redundancies in Kiwi companies at this stage.
However, the longer the problem continued, the more likely that was, he said.
The Government has provided some assistance, with New Zealand Trade & Enterprise last month announcing small firms that exported more than $500,000 a year of infant formula, other dairy products or finished products using dairy ingredients could apply for assistance in travel costs.
Successful applicants will be reimbursed for up to $20,000 of their travel costs to affected markets. The travel subsidy was part of a $2m NZTE fund to rebuild relationships and undo the damage to New Zealand’s reputation from the botulism scare.
Barnett was concerned the contamination scare would lead to an over-regulated market that would «hit the problem with a sledgehammer».
Two-year-old company Ever Health was another infant formula supplier whose products were not cleared for more than a month by Chinese customers despite not using the whey protein concentrate.
The company was able to provide Chinese customs with clean testing results and additional documentation.
Source: Stuff