THEY say bad things come in threes. We’ve got Fonterra planning to “vigorously defend any proceedings” taken by Danone for US$400 million. Then there is Fonterra Brands voluntarily recalling fresh cream sold under the Anchor and Pams brands in the upper North Island.
As a farmer you wonder, what’s next?
First up, Fonterra has done things by the book in voluntarily recalling these bottles of fresh cream. Visit foodsmart.govt.nz and you’ll learn that food product recalls take place no matter who’s in government. In 2008, there were 19 recalls versus 14 last year and they include everything from hash browns to fish fillets.
So while there will be plenty of questions around packaging, Fonterra has done the right thing. Yet I’m not so sure when it comes to digging in its legal heels with Danone.
With lawyers there’s only one absolute truth; they always win. Being a Fonterra shareholder I know there will be a cost and that it will likely fall on the already slashed dividend, the milk price forecast, or both. It may come this season or the next but a cost will come, especially if the lawyers run this show.
I am not saying Fonterra should roll over and let Danone take us for large sums of cash, but there has got to be a commercial settlement here. How do the fine words on Fonterra’s website square with a former major customer now saying “see you in court?” How does that look to our other customers? In fact, I hope this case never sees the inside of a courtroom.
Danone is answerable to its shareholders and the food scare hit them hard. If the shoe was on the other foot we’d be baying for action but legal belligerence is not the best response.
When the non-botulism scare broke I said that the customer is always right because trust and integrity are the biggest assets we have. That means standing by our products when things don’t go well as we are with fresh cream. It was Fonterra who rightfully passed on information and pulled the red-card on WPC80, as it did in the latest recall. The Independent Fonterra Board Report into the non-scare revealed a catalogue of things to be fixed, as did the Government’s own report. We’ve got to take these lessons and move on.
The big concern I have is that commercial realism goes out the back door once the lawyers enter through the front. Back in the 1980s, McDonald’s learned the hard way when you unleash the lawyers. Known as “McLibel,” the case turned into a 20-year legal running sore that became a text book example for how to lose control. OK, this won’t because it’s corporate on co-operative rather than a bunch of activists but, given the overseas media calls I have taken on this, it could still run away with Fonterra’s reputation.
We do not want to undo the good work Fonterra did by using the red card and keeping public safety paramount whatever the fallout. This work will all but be forgotten when we enter the courtroom. We must reach a commercial settlement.
For Danone this PR is golden because it says to their customers they were wronged. For Fonterra, it’ll just knock the scab off a wound that we farmers want healed.
While I believe Danone only accounted for a small part of Fonterra’s revenue and may be easy to replace given demand, this cold economic analysis misses the point. They were a customer that we farmers want to win back.
Source: Gisborne Herald