Fonterra has continued to refuse to address why it took so long to inform the public about the potential health risk from its contaminated whey powder.
Fonterra head of New Zealand milk products Gary Romano after a press conference this evening denied the dairy giant had told the Government about the risk days before the public.
It was «simply not true» Fonterra had informed the Ministry of Primary Industries (MPI) about the situation on Wednesday last week, he said.
Prime Minister John Key has previously questioned why Fonterra waited until Friday to alert authorities. Consumers did not find out until early on Saturday morning.
The product was manufactured more than a year ago in May 2012, but tests first alerted Fonterra to a potential problem in March.
«At that point there was no belief by anyone that this was going to lead to concern for the consumer,» Romano said.
The company would discuss timelines at a later date.
«I’m not really in a position to have those discussions today,» he said.
«That timeline will be subject to our own internal review.»
The Financial Markets Authority has also said it is concerned about the time it took Fonterra to disclose the issue to the New Zealand stock exchange, where units in the Shareholders’ Fund units are traded.
It will be discussing the issue with the company.
Fonterra didn’t file a statement to the New Zealand stock exchange until the markets reopened on Monday morning.
Communications director Kerry Underhill said the company had spoken to its lawyers and believed it had satisfied the regulatory requirements.
The Government has promised to conduct a thorough review of the affair, with MPI expected to oversee Fonterra’s internal inquiry.
Romano confirmed the review would cover the timeline, the testing of samples, and the company’s processes.
Botulism fears were first raised on Saturday when Fonterra made public a «potential quality issue» in whey concentrate from a plant in Hautapu, Waikato.
Romano said Fonterra was still focused on operational issues, including helping to assist precautionary product recalls.
He apologised for «unnecessary confusion» over which infant formula products were affected by a botulism scare
In a Campbell Live interview on Monday night he had «inadvertently» led families to believe that all Karicare products, manufactured by Nutricia, were unsafe.
The correct products that have been recalled are the Karicare Stage 1 New Baby Infant Formula (from birth) and the Karicare Gold+ Stage 2 Follow On Formula (from six months).
«The reasons for that are the normal human ones,» Romano said.
«I was on the spot. I thought I had an understanding of the situation.»
Botulism is a serious illness that causes paralysis of muscles. Contamination had been traced to a pipe and three batches of whey, which were turned into 900 tonnes of varied food products sold by eight companies in seven countries.
As Parliament debated the unfolding contamination scare, andÂ Finance Minister Bill English said «tens of millions» of dollars worth of New Zealand dairy products have been blocked from entering countries around the world.
Ahead of the statements by political leaders in the house, English described the amount of dairy product being blocked as «pretty small» in terms of the size of New Zealand’s economy. Whole and skim milk powder, fresh and UHT milk, butter, cheese and yoghurt were not affected.
«The big issue here is going to be re-establishing our reputation and that’s all about the handling of the situation honestly and transparently,» he said.
The «tens of millions» statement was a ballpark figure about just the products that were being blocked rather than any long term reputational damage, which was not being estimated, he said.
It was based on an unfolding situation of which countries were blocking which products.
«There’s quite a lot of confusion about what different countries have said and what’s been meant about which products they were blocking,» English said.
He did not believe the problem was of a scale that it could knock New Zealand’s gross domestic product «at the moment», but added: «Of course how it’s handled in the long run will make a difference.»
Tighter rules and government oversight for Fonterra may be on the cards in a bid to temper the international fallout.
Earlier today Prime Minister John Key said a government inquiry will need to reassure parents and international markets that the mistake can’t happen again.
«The biggest and most important thing we can do is as part of that full review we are open and honest about what went wrong and demonstrate that there’s change,» he said, suggesting a tighter regulatory regime could be one outcome.
Key also said he would head to China if required to reassure New Zealand’s biggest export market.
«In the end our reputation is everything and if that’s what was required, I’d do it.»
English said then that the Government needed reassurance that Fonterra was operating to standards which reflected the risk to the entire economy it posed »when things go wrong».
The inquiry was likely to cover whether there needed to be greater government oversight into Fonterra’s testing and systems, he signalled.
Fonterra chief executive Theo Spierings has flown to China in an attempt to conduct damage control over the situation, which has prompted international bans.
Companies that have had to recall infant formula could sue Fonterra for damage to their brand and a loss of market share, a marketing expert said.
University of Auckland head of marketing Rod Brodie said there was precedent to claim compensation for damage done to a brand and reputation after a contamination or recall.
He had been involved in the 1990s with a New Zealand infant formula company, which he wouldn’t name. It had had to recall its products in New Zealand. The company was able to claim 10 per cent of the value of New Zealand’s infant formula market for the next 20 years from the dairy company that supplied it with contaminated product.
While the Fonterra case was different as several different brands were involved, the affectedÂ companies’ income and brand would be damaged and someone would be able to put a cost on that, Brodie said.
Commercial lawyers saidÂ they expected Fonterra to offer compensation to the eight companies that had to recall their products.
University of Auckland commercial law professor Dr Chris Noonan said the companies sold the product could return the recalled goods to Fonterra and be refunded the cost.
While there were no reports of sickness from the contaminated product, Noonan said the situation would become even more difficult if someone fell ill.
ACC law prevented people in New Zealand from suing Fonterra if they became sick, he said.
However, if someone in another country became sick from the contaminated products they could sue the company, depending on the law of their country, he said.
Nutricia would not comment yesterday on whether it would be seeking compensation from Fonterra.
The international incident also drew attention to the necessity of a rebrand for the export market, Brodie said.
«‘100 per cent Pure’ is a tourism brand, which when transferred to export-related communications becomes a potential liability.»
Many Fonterra farmers are taking the fallout over the botulism crisis personally and will expect answers from the dairy company’s leaders when the the situation is under control, the farmer watchdog said.
Fonterra Shareholders’ Council chairman Ian Brown said he had had calls from shareholders worried about the effects of the scare on Fonterra.
About 10,500 dairy farmers own Fonterra, New Zealand’s biggest company and the world’s biggest dairy exporter.
Brown said farmers were asking the same questions that the the public were asking.
«But farmers have a different perspective. This is our business. A lot are taking it quite personally,» he said.
Late last night, baby products firm Nutricia extended a voluntary recall to cover two lines of infant formula that may be contaminated with a bacteria that could potentially cause botulism. The two lines recalled are:
– Karicare Stage1 new Baby Infant formula (from birth) – all batches.
– Karicare Gold+ State 2 Follow On Formula (from six months) – all batches.
The Ministry for Primary Industries is assisting with the voluntary recall with statutory advertising of the recall notice as well as advertising on radio, Facebook and other online advertisements.